Gold News: Support Base Builds Bullish Outlook as 50-Day Average Comes Into View

Dollar Break Gives Gold Its Best Session of the Week

Gold is rallying Thursday and the dollar is the reason. Spot gold is higher after the dollar dropped about 0.8% on renewed concern that Japanese authorities could intervene to support the yen. The 30-year Treasury yield is still hovering near 2007 levels, and gold is climbing anyway. The metal does not need the bond market to cooperate right now. It just needs the dollar longs built ahead of the Fed meeting to keep unwinding.

At 21:00 GMT, XAUUSD is trading $4102.98, up $36.64 or 0.90%.

That is what is happening. September hike odds dropped from near 77% before Wednesday’s decision into the 57% to 61% range after the hold and Thursday’s PCE data. The market had been carrying gold lower on the assumption that a September tightening was nearly locked in. Warsh did not hike, refused to give a timetable, and the dollar lost its bid. Gold buyers stepped into the gap.

Daily Spot Gold (XAUUSD) Technical Analysis

Daily Spot Gold (XAUUSD) is edging up into the close on Thursday. The possible formation of another secondary higher bottom at $3996.06 suggests the presence of buyers. Crossing to the strong side of the short-term retracement zone at $4072.40 to $4041.65 is also a potentially bullish sign. That is provided buyers can build a support base at or above this zone.

The problem is, we’ve seen this formation before. It’s usually formed by passive bidding or dip buying. It also could be indicating that accumulation has been taking place for the entire month of July. Now we have to see aggressive traders come in and actively take out offers to extend the rally in my opinion.

The accumulation pattern not only formed an elongated support base, but it also allowed the 50-day moving average to move down enough to be relevant once again.

Resistance is a retracement zone at $4162.36 to $4214.34, swing tops at $4166.13 and $4202.71 and the 50-day moving average at $4194.47.

The formation of the support base could be creating the momentum needed to challenge the resistance cluster. Crossing to the strong side of the 50-day moving average will be a second sign of increasing buying, which makes the Fibonacci level at $4214.34 the most likely trigger point for an acceleration to the upside.

September Hike Odds Fell but Did Not Disappear

The Fed held in a 9-3 vote Wednesday. Hammack, Logan and Kashkari wanted a quarter-point increase, and Warsh made clear the committee remains committed to getting inflation back to 2%. That is not dovish. But it was less aggressive than what the market had positioned for, and the repricing is showing up directly in the dollar and in gold.

Warsh gave the market no dot plot, no projections and no roadmap for September. That is a different Fed than what traders have been operating under, and it means the rate premium that was sitting on gold cannot hold without new inflation data to feed it. Thursday’s PCE did not feed it.

PCE and GDP Did Not Give the Hawks Ammunition

Core PCE rose 0.1% in June, softer than the 0.2% estimate, with the annual rate at 3.3%. Headline PCE fell 0.1% for the month and came in at 3.7% year-over-year. The dissenters still have 3.3% core to wave at the rest of the committee. They do not have a number that got worse since the last meeting, and that is the distinction gold is trading.

June’s report captured a stretch when energy costs were easing. The next prints pick up more of the crude rebound, and if those readings come in firmer, the hawks get the ammunition this report denied them. Gold has a window between now and the next inflation release. Not a trend change.

GDP missed at 1.5% against the 1.8% estimate, but the soft spot was government spending and inventories. Personal consumption held at 2.1%. Final sales to private domestic purchasers came in at 3.9%. The private economy is not falling apart, and Treasury yields moved higher after the data because the bond market read it the same way. Gold is climbing into rising yields because the dollar is doing more work than yields are doing damage. That does not last forever.

Crude Keeps the Ceiling on Gold’s Rally

U.S. strikes hit IRGC targets inside Iran overnight. Iranian missiles hit U.S. forces the day before. Hormuz is still barely functioning. Crude is elevated and every dollar it holds above $85 makes the next inflation report harder for gold bulls to count on.

Gold is rallying because the worst-case Fed outcome came off the table Wednesday night. The Middle East is the reason that rally has a ceiling. Warsh does not have to hike in September to stop this move. He just needs crude to keep the inflation data firm enough that the market cannot look at three dissents and shrug them off.

What to Watch

The dollar broke lower and September hike odds dropped 15 to 20 points from where they sat before the Fed meeting. That repricing opened the door for gold and the metal walked through it. The question now is how long the dollar keeps falling. The PCE number did not rebuild the hawkish case, but crude is still running and the next inflation readings will carry more of the energy cost that June’s report missed. If September expectations start climbing again on that data, the dollar finds a floor and gold loses the one thing supporting it.

The chart shows a month of base-building that has pushed gold above the lower retracement zone at $4072.40 to $4041.65. The resistance cluster overhead at $4162.36 to $4214.34 with the 50-day moving average sitting inside it is where this rally finds out whether it has real buying behind it or fades the way the previous attempts did. The accumulation pattern gives buyers a foundation, but passive dip-buying is not enough to crack through that resistance. The move needs aggressive offers getting taken out, and so far that has not happened.

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