Gold News: Warsh’s Tone Could Break the Gold Market’s Five-Week Range

Gold Enters FOMC Week Still Trapped by Oil

Spot gold closed higher last week. Brent crude pulled back from above $100 and Treasury yields eased from their highs. The gain came late Friday on dip buying and short-covering but the rally stalled well short of the levels that would signal a turn.

The FOMC on Wednesday and Thursday’s PCE report are sitting directly in front of a market that has dropped 23% since February and has not found a reason to stop falling beyond positioning relief when oil pauses.

Spot Gold settled at $4,052.845, up $35.53 or +0.88%.

Weekly Spot Gold (XAUUSD) Technical Analysis

The trend is down according to the weekly swing chart and the 52-week moving average. A trade through the current minor bottom at $3942.10 will signal a resumption of the downtrend. A move through $4202.71 will shift the minor trend to up. This could drive momentum to the upside.

Overcoming the 52-week moving average at $4298.94 and sustaining the move will be a sign of strength. This could trigger a surge into $4481.78. This level is 20% below the all-time high at $5602.23, a decline many classical chartists use to define a bear market.

For five weeks, XAUUSD has been straddling a key 50% level at $4069.54. The price action suggests that trader reaction to this pivot could determine the next near-term move. Associated with the 50% level is the 61.8% level at $3707.82. This is the next potential downside target. Both retracement levels are part of the long-term, $2536.85 to $5602.23 trading range.

Crude Is Still Running the Gold Trade

Brent backing off from triple digits is what gave gold room last week and that is the only reason the metal finished higher. The war has not stopped and every rally in crude since February has fed directly into the rate story that has taken 23% off gold’s price. One Friday of lower oil after a week where Brent added nearly 12% did not change that pattern.

A fresh shipping disruption or broader military action over the weekend sends crude right back up and puts the rate trade in charge before Warsh even speaks. Gold has been on the wrong side of this fight for five months and it needs more than a pause in oil to get off the mat.

Warsh Sets the Tone Wednesday Afternoon

No new projections and no dot plot this meeting. The statement and the press conference carry all the weight and Warsh has been clear about where he stands since taking the chair. He dropped easing language from the June statement, skipped the dot plot entirely and told the ECB Forum in Sintra that prices are too high. The bond market has already pushed September hike odds heavily higher and priced a meaningful chance of a July move. Wednesday is about whether Warsh gets behind that or lets the market do the tightening on its own.

If he leans into the energy story and calls the inflation risk persistent, yields and the dollar catch another bid and gold pays for it immediately. If he holds without adding any new pressure on the inflation side, buyers who have been defending the $4,000 area get room to work. The way I see it, the range gold has been stuck in for five weeks breaks on Wednesday afternoon one way or the other.

PCE on Thursday Can Change the Reaction

The advance second-quarter GDP estimate and June personal income and outlays land at 12:30 GMT Thursday. The PCE number inside that release hits the day after Warsh speaks and it can either confirm or undercut whatever the market takes from the press conference. A hot reading after a hawkish Wednesday locks the selling in for the rest of the week. A soft number is the best thing gold can get next week because it pulls the rate conversation back without needing a ceasefire or a drop in crude to do it.

Friday’s Employment Cost Index at 12:30 GMT closes the calendar. Wages running hot after a hawkish Fed and firm PCE keep the dollar bid through the weekend. Wages coming in soft give Treasury buyers a late reason to step in and help gold hold whatever ground it picked up earlier in the week.

What to Watch

The FOMC is the first decision point Wednesday and Warsh’s tone on inflation determines whether gold gets room to extend or whether the selling pressure comes back with the Fed’s stamp on it. Thursday’s PCE is the second decision point and a soft reading would be the strongest fundamental support gold can get next week. Friday’s ECI decides whether the weekly move holds into the close.

Through all three events, crude is the variable that controls the direction. Gold buyers need oil to stay contained and yields to keep drifting lower to build on last week’s gain. One escalation in the Middle East puts crude back in charge and at that point the FOMC and the data calendar take a back seat to the shipping headlines.

The weekly trend is down and the market has been straddling a key pivot for five consecutive weeks. A break above the minor top would shift the trend indicator and open a run toward the 52-week average. A break below the minor bottom resumes the downtrend. The pivot has held the range so far and next week’s events are the catalyst that could push gold out of it in either direction.

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