XAUUSD: Breakout or Bull Trap?
19th August
Key takeaways
Gold has traded in a tight range for almost two weeks despite gaining roughly 7% in August.
Markets are pricing around a 35% chance of a September Fed rate hike
The 100-day SMA remains gold's key technical hurdle.
Lukman Otunuga
Head of Market Research
Gold has been trapped in a range for almost two weeks.
After its explosive rally at the start of August, the precious metal has struggled to break free – repeatedly bumping into the 100-day SMA.
Still, prices are up roughly 7% in August, putting it on track for its strongest monthly performance since February.
WHY IS GOLD STUCK?
Gold is being pulled in opposite directions by a mix of technical and fundamental forces.
Hormuz uncertainty: A lack of progress on the geopolitical front is keeping traders cautious. Trump said Tuesday that no talks are taking place with Iran, leaving the fate of the Strait of Hormuz hanging in the balance. Any escalation may fuel inflation fears, weighing on gold as rate hike bets jump.
Shifting US rate bets: Markets are now pricing roughly a 35% chance of a September rate hike, down from around 50% just one week ago. Lower rate expectations are typically supportive for non-yielding assets like gold.
100-day SMA gatekeeper: The metal keeps knocking on the door, but buyers have yet to force a convincing breakout toward the 200-day SMA. Until that happens, gold may remain stuck in wait-and-see mode.
WHAT COULD MOVE GOLD THIS WEEK?
The Fed minutes are tonight's main event.
Investors will dissect every word from July's policy meeting for clues about the Fed's next move.
• A dovish set of minutes could strengthen the case for rates remaining on hold, boosting gold while weighing on the US dollar.
• A hawkish surprise, however, may revive rate hike bets and challenge the bullish outlook for bullion.
TA OVERVIEW
Frequently asked questions
Gold is being pulled in opposite directions by shifting Fed rate expectations, geopolitical uncertainty around the Strait of Hormuz, and key technical resistance at the 100-day SMA.
The minutes may offer fresh clues on the direction of US interest rates. Dovish signals could support gold, while a hawkish tone may strengthen the US dollar and weigh on bullion.
The 100-day SMA remains the key hurdle. A sustained break above this level could pave the way toward the 200-day SMA, while failure may keep prices trapped in their recent range.
