Three-Month High Retreats, PCE Data Revives Rate Hike Trading
In early European trading on Friday, gold fell below $4,600, retreating from a three-month high to around $4,580. The US core PCE price index for July remained unchanged year-on-year at 3.3%, matching market expectations; both the monthly overall PCE and core PCE increased by 0.2%. While the data did not unexpectedly surge, it reinforced the judgment that the Federal Reserve may continue to raise interest rates.
The CME FedWatch Tool shows the probability of a September rate hike increased from 36% before the data release to 40%. Gold itself does not generate interest, so higher interest rates increase the opportunity cost of holding gold. Therefore, the warming expectations for a rate hike became the direct reason for this round of profit-taking. The market now awaits a speech from Federal Reserve Chairman Kevin Warsh at the Jackson Hole Global Central Bankers Conference to gauge whether the policy stance will turn more hawkish.
Hormuz Strait Sees Hope for Reopening, Oil Price Inflation Risk Declines
Iranian National Security Official Mohsen Rezaei stated that Tehran, in response to mediator requests, is preparing a list of conditions for reopening the Hormuz Strait, including ending regional wars. If diplomatic efforts promote the resumption of shipping, inflationary pressure from oil prices may decrease. This change could alleviate market concerns about more aggressive rate hikes, thereby limiting the downside space for gold.
TD Securities believes that Warsh adopting a more hawkish tone is the main risk for gold, potentially triggering further reversal. However, to genuinely reverse the already improved sentiment in the precious metals market, the degree of policy surprise would need to be relatively high. In other words, merely reiterating an anti-inflation stance may not be enough to disrupt gold's medium-to-short-term bullish structure.
$4,585 Is the First Line of Defense, $4,760 Is the Bullish Gate
On the daily chart, gold remains clearly trading above both the 100-day moving average and the Bollinger Band midline. Despite the pullback from highs, the short-term structure remains biased to the upside. The 14-day RSI is around 65, indicating momentum remains positive but has not yet entered extreme overbought territory. This suggests upward pressure persists, though the closer to highs, the more sluggish the gains may become.
The first resistance above is near the upper Bollinger Band at $4,760, where the previous rally may encounter selling pressure again. Immediate support below is around $4,585, with stronger supports located at the Bollinger Band midline of $4,415 and the 100-day moving average of $4,375. Only if these trend supports are successively breached would the deeper level of $4,073.52 come into view. Before that, the current decline still resembles a retracement within an uptrend.
