Gold is up another 0.6% today as buyers continue to keep poised in chasing a major breakout move to start September trading. Things are continuing to fall into place for gold and after a period of consolidation since the end of May, is this where we see the technical side also play ball?
Gold (XAU/USD) daily chart
The April high earlier this year stalled at the $3,500 mark and buyers have been biding their time ever since. After a couple of tests of the 100-day moving average (red line), we’re seeing buyers look to prove their mettle again this week. But again, they now run into a key challenge of having to firmly break above the $3,500 level.
Besides the fundamental factors of seeing Fed easing prospects, central bank buying, ETFs playing catch up, and dollar disdain, stagflation risks are also potentially adding to another key driver for higher gold prices.
Even though we’re not quite seeing a material impact from tariffs passthrough on US inflation just yet, market players are still reserving some caution for now. Market-based inflation expectations for the next 5-10 years continue to rise ever since April with the earlier spike at the end of July being the highest in a year.
If the trend continues and we do see more evidence of tariffs passthrough on prices, that is going to be a key development to be mindful of. And it could be one that sends the next rally in gold into overdrive.
As for downside factors, just be wary that September is usually a poor month for gold and precious metals historically. But again, there aren’t that many Septembers that have quite the focus like this one on US data as well as the Fed.
