
Gold weekly outlook: XAU/USD remains stuck between a rock and a hard place
Gold remains at risk of staging a deeper correction. Though the dollar has eased back a bit along with yields, both still remain fundamentally supported.
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Gold remains at risk of staging a deeper correction. Though the dollar has eased back a bit along with yields, both still remain fundamentally supported.

Gold has bounced from a major inflection zone, but bulls still need follow-through as next week’s CPI report puts the recovery to the test.

Gold started last week with a strong sell-off but from that move a bounce developed. Bulls could not hold on through the weekly close, however, and the bearish structure remains in-place for XAU/USD.

Softer inflation has revived expectations for a Fed pause, but Friday’s payrolls could put gold’s recovery prospects to the test.

Gold fell 1.8% last week and is now down for a third consecutive week, suggesting that momentum continues to fade following the powerful surge we saw in August. On Friday, the precious metal initially fell in reaction to the US CPI data but then rallied sharply from its lows immediately afterwards in a classic “sell the news” reaction, before fading into the close. Ultimately, gold finished Friday’s session 0.7% higher.

Gold has reversed sharply into major support, with a decline of nearly 9% setting up the first meaningful test of the August breakout.

The true test of trend is what happens after a counter-trend jolt, and that’s where gold as into next week as the overbought trend has just moderated with the largest daily sell-off in two months.

Gold prices continued to jump last week and with the US Treasury playing defense in a debt spiral situation it seems unlikely that austerity and fiscal prudence will enter the equation.

Gold has reached a pivotal resistance zone that could determine whether the monthly breakout has further to run. Battle lines drawn on the XAU/USD charts.

Bond yields pushed higher again on Friday as the consolidation near the upper end of the recent range continued, mirroring the price action of oil prices, posing threat to the gold recovery attempt.

Gold just posted its best week since January, but the breakout now enters the phase that could determine whether a lasting low is finally in place.

Gold has spent six weeks trapped in a tightening range at the yearly low, with the next breakout likely to determine the August outlook.

Gold has been mired in a strong sell-off since the start of the year but sellers haven’t been able to break much fresh ground over the past month. The FOMC rate decision could have a large bearing on whether that changes.
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