Gold Does Something it Hasn’t Done in a Year, is Larger Risk-Off Afoot?

Gold Talking Points:

• Gold prices sold off again last week as Treasuries caught a bid and tech stocks continued their descent.
• Next week brings the Fed and the wide expectation is for a hold next week but a hike in December, and as we saw in both June and July, the nuance around the press conference can have a big impact on gold prices.

It was a meteoric rise for gold after the metal spent three and a half years resisting at $2k. But as the Fed signaled rate cuts on the way, even with inflation well above the 2% target, gold markets became untethered in February of 2024 and rallied in historic fashion, at least for the time. The move eventually pushed up to $2790 ahead of the US Presidential election and after a two-month pullback, the rally resumed and this time, bulls held a decisive advantage for much of the time.

Gold Weekly Price Chart

Chart prepared by James Stanley; data derived from Tradingview

In terms of pauses, the only other such scenario after that post-Presidential run was the four-month period ahead of Jackson Hole last year. This is when Jerome Powell wasn’t as dovish as markets wanted, instead, fearful that tariffs would boost inflation and that refrained the Fed from further cuts.

But it was the Jackson Hole Economic Symposium where he finally started to shift, and that’s when gold broke out of a symmetrical triangle that, eventually, ran through this year’s open.

Along the way, the $4k level was a mere speed bump that slowed bulls down for a couple of weeks. But, more recently, it’s become a bigger objective as it held support for two months earlier this summer.

Gold Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

Gold in 2026, the Shift

As inflation flared earlier in the year the prevailing thought was that we would get a more hawkish Fed, and that tempered gold prices in a big way in the first half of the year. But the showdown was at that $4k level, and that price finally came into play after the June rate decision, when Kevin Warsh sounded more-hawkish than markets had expected.

That $4k test lasted for a while, but on a weekly close basis, gold never finished the week below that price – until this week. I think this can be boiled down to a short-term v/s long-term concept, where longer-term buyers had come in to support that level, as rate hikes and hawkish policy in the US were seen as short-term mechanisms to tame inflation. And with President Trump’s ‘we’ll grow our way out of debt,’ that makes sense.

Even if currency debasement isn’t here right now, it probably will be whenever the Fed can finally get a handle on inflation.

But, more recently, something else has popped up, and this was something I addressed in the Friday video on StoneX.

USD/JPY Carry Trade and AI Bubble Fears

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Dash for Cash

Last week saw money come out of many different pockets of the market and rush into US Treasuries. This has been a recurring theme in StoneX videos, as I’ve been highlighting that a bid in Treasuries can create an attractive trade that draws capital out of many other asset classes.

The fact that buyers did not come in to boost gold above that $4k level by the end of the week adds some color around that scenario. The continued sell-off in gold is driven not only by capital rushing into Treasuries to get higher rates before more Treasury buying pushes yields down, but also by the fear that higher inflation and a more-hawkish Fed will continue through next year.

This is where a degree of correlation could build between gold and stock prices, as risk aversion drives capital out of both markets.

Gold Weekly Chart

Chart prepared by James Stanley; data derived from Tradingview

Gold Near-Term Strategy

The $4k break is still rather fresh, so there can still be a case made on either side of the matter, but given the bias, we’ll first address the bearish argument.

At this point there’s a few different prior support levels overhead that can now function as lower-high resistance. For ‘r1’ resistance, the prior swing lows from 4066-4073, and above that for ‘r2’ we have a prior support zone around the 4100 psychological level that syncs up to the 4111 prior swing.

The ‘r3’ zone, and what I’m considering as invalidation for the bearish theme, is around $4200 and if we do see a break of that area, then something has shifted. That was a big spot of resistance for almost a full month and if buyers can suddenly break through, then we’ve probably seen a shift of fundamentals, of some sort.

Gold Daily Price Chart

Chart prepared by James Stanley; data derived from Tradingview

Gold Bullish Strategies

At this point the long side seems like swimming upstream so some work will need to be done, but there could be a couple of ways of approaching this after the Sunday open.

The first would be for reversal scenarios, and traders would likely want some evidence of gold re-claiming $4k before looking to work a bounce up to prior resistance, around the $4030 area. The key for that would be a hold above $3975, the low from Friday.

But if we get a break of $4030, then there could be short-term bullish recovery ideas getting more attractive, which could then target those longer-term resistance levels looked at above, such as $4066-4073, after which $4023-4032 could become higher-low support potential.

Some work would need to be done on that front but if cooler heads prevail on the risk-off trade, this is certainly a scenario that could come into the picture.

Gold Four-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Market Analyst, Global Macro