On September 14, in our previous analysis last Friday, we noted that Thursday's US PPI data came in higher than expected, indicating that inflation remains stubborn. This has heightened expectations for a September rate hike by the Federal Reserve, creating a critical headwind for gold prices. The market was awaiting Friday's CPI data to provide clearer directional signals. Additionally, the short-term technical picture showed that gold had some rebound potential, but with bears holding the overall advantage, any bounce without fresh catalysts could be limited, leaving prices vulnerable to another pullback. Our operational guidance suggested monitoring resistance at $4,365, followed by $4,400, with support at $4,300, and then $4,240 and $4,200.
Looking at subsequent price action, during Friday's European trading session, gold rebounded to $4,360 but encountered resistance, then traded lower in a range-bound manner until finding support at $4,325. At the US market open, gold experienced a sharp drop to $4,290 before quickly stabilizing and rebounding to a high of $4,402. However, the price failed to decisively hold the $4,400 round number level after multiple attempts. During the US session, it came under selling pressure again, settling at $4,342 before the close, giving back most of the day's gains. On Monday, gold continued its downward drift, hitting a one-month low of $4,278 before currently trading around $4,286, showing a weak short-term bias.
Overall, gold's brief rebound has stalled, with prices turning lower once again from the $4,400 resistance level we had identified, aligning broadly with our expectations. According to Wolfinance's star analyst, gold has been under pressure this week, and the continued decline after Monday's open is largely due to rising expectations of a Fed rate hike, which is weighing heavily on the precious metal.
In detail, the stronger-than-expected US non-farm payrolls data released earlier lifted the probability of a September Fed rate hike to nearly 60%. Thursday's higher-than-expected US PPI reading pushed that probability up to 70%. Then, Friday's US CPI data showed a 0.4% month-over-month increase, significantly above July's 0.1%, with core CPI posting its largest gain in four months. This acceleration in US inflation data drove the September rate hike probability further up to 87%. The US dollar also climbed to a one-week high. Additionally, ongoing tensions in the Middle East have kept oil prices elevated, surging to a three-month high. These high energy costs are intensifying concerns about long-term inflation, which in turn fuels expectations for rate hikes by global central banks. All these factors are diminishing the appeal of holding non-yielding assets like gold, thereby pushing its price lower.
On the daily chart, gold is under pressure, having hit a one-month low, indicating a weak short-term bias. Upside resistance is now seen at the mid-Bollinger Band of the weekly chart around $4,320, which also served as the main support during Monday's Asian session. Further resistance lies at the day's high of $4,355. On the downside, immediate support is at the day's low of $4,278, which has been tested twice and held for now. A break below could open the door to the lower Bollinger Band of the daily chart near $4,230, followed by the $4,200 psychological level. The 5-day moving average is in a bearish crossover, the MACD indicator is also bearish, and the KDJ and RSI indicators are pointing downwards, all confirming the bearish short-term technical setup and suggesting further downside risks.
Gold Intraday Reference: The US CPI data came in higher than expected, further solidifying market expectations of a Fed rate hike in September, with the probability now at 87%. Additionally, oil prices are rising, hitting a three-month high, all of which are collectively pressuring gold prices. Operationally, a range-trading approach is recommended. Monitor resistance at $4,320 and $4,355, while supporting levels are at $4,278, with a breakdown potentially targeting $4,230 and $4,200.