After weeks of consolidation below the $2500 mark, gold finally broke through on Friday. Even though it’s trading sideways on Monday, I see potential for further upside as the yellow metal remains in a dip-buying mode.
The bullish trend is still intact, keeping bearish speculators at bay. And with little fundamental justification for short selling, gold may be undervalued considering the devaluation of fiat currencies due to inflation.
Although inflation is slowing in some areas, it’s not deflation. Inflation-hedging demand could continue to support gold, especially as bond yields drop amidst expectations of Fed rate cuts.
Gold underpinned by weaker US dollar
The recent weakness in the US dollar has also bolstered gold prices. Despite strong economic data, the dollar struggled last week due to softer inflation figures and other economic indicators.
With the Fed focusing more on employment and expectations of rate cuts, any indication of a September cut could weaken the dollar further, providing additional support for gold.
Key macro events this week: Global PMIs and Jackson Hole Symposium
Looking ahead, the Jackson Hole Symposium on Friday could provide clues on future Fed policy changes. Strong retail sales and jobless claims data suggest a September rate cut is more likely, which could impact the dollar and gold prices.
Gold technical analysis and trade ideas
With resistance levels broken, the $2450-$2480 area becomes a key support zone. On the upside, Fibonacci extension targets and round handle levels like $2600 could be potential resistance areas to watch.
Overall, gold’s bullish trend, weakening dollar, and potential rate cuts could keep pushing gold prices higher in the near future.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.
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