Gold experienced a strong rise after a weaker-than-expected Non-Farm Payroll (NFP) report. This has changed what the market expects, now pricing in 59 basis points of interest rate cuts by year-end, a bump from the previous 35 basis points. Investors are now looking ahead to new data and comments from the Fed as we approach the next Federal Open Market Committee (FOMC) meeting in September. Many believe that more favorable data might lead Fed Chair Powell to think about a rate cut during the Jackson Hole Symposium. This could keep gold prices trending upward as real yields drop with Fed easing. However, any shift to a more hawkish view on interest rates might lead to short-term drops in gold prices.

Gold’s Daily Technical Analysis

In our daily technical analysis, gold’s price rebounded before hitting the 3,245 support level, with buyers aiming for the 3,438 resistance. On the 4-hour chart, the price broke above a downward trendline, with support now around 3,334. Buyers may continue to push toward the 3,438 level, while sellers might look for a return to 3,245 support. On the 1-hour chart, the 3,334 level is crucial for buyers hoping for a rebound, with increased buying likely if the price rises above 3,369. Important upcoming data includes the US ISM Services PMI and US Jobless Claims. The market response to the recent NFP report has been significant. It showed softer than expected results, leading to market pricing of almost 60 basis points for interest rate cuts by year-end. This is a major increase from the 35 points priced in just before the report, driving gold’s recent rally. For traders who are optimistic about gold, this is a good chance to target the $3,438 resistance level. Buying call options or setting up bull call spreads below this level could help capture further gains if the positive trend continues. This strategy allows for defined-risk exposure as the market rallies towards this technical barrier.

Monitoring Key Levels

It’s important to keep an eye on the $3,334 level, which now serves as a support base. If it breaks below this level, it could indicate that the recent rally is losing strength, potentially drawing sellers back in. Traders might consider put options to target a move back down towards the $3,245 support area. Upcoming data this week will be crucial for short-term trends and market volatility. If the US ISM Services PMI falls below 52.0 tomorrow, August 5th, it would strengthen the dovish viewpoint. Conversely, a reading above 54.0 could challenge that outlook. We will also monitor Thursday’s jobless claims; a rise above 235,000 would further support the argument for an earlier rate cut. Looking ahead, this environment feels reminiscent of the late 2023 pivot when rate cut expectations propelled gold prices upward. The long-term outlook for gold seems positive as the central bank considers easing policies. Yet, as seen in early 2024, the path can be unpredictable, with hawkish data potentially causing sudden pullbacks. All eyes will be on Fedspeak and the Jackson Hole Symposium later this month. We believe Fed Chair Powell might use this opportunity to hint at a possible rate cut in September if economic data remains soft. Any sign of caution or hawkishness from Fed officials could quickly shift the current market sentiment, making flexible trading strategies essential. Create your live VT Markets account and start trading now.

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