Gold’s Jackson Hole Rally: What’s Next?

  • Gold showed upward momentum, supported by lower bond yields and a weakened USD due to economic data.
  • For downside risk, bears may again target the $1880 and $1885 resistance if the price falls back below $1908 level (200 SMA). Immediate upside risk is potentially restricted at $1920 (20 SMA).

Gold is possibly still within its descending channel, though it has discovered a foothold at $1885 and demonstrated an upward shift this week due to a decline in bond yields. However, the anticipation is for the Fed funds rate to remain higher for longer, so gold’s upside potential might be short-lived.  

Butting up against this hypothesis is the very recent surge in XAU/USD from $1900 to $1916 on the chart. This surge can be attributed to a weakened USD, which followed the release of several data points, including a decline in the US Composite PMI to 50.4 in August (below the expected 52.0), and a drop in the Manufacturing PMI to 47.0, reaching a low point for the past two months. 

For downside risk, bears may again target the $1880 and $1885 resistance if the price falls back below $1908 level (200 SMA). Immediate upside risk is potentially restricted at $1920 (20 SMA). Jerome Powell is set to take the stage at the Jackson Hole Symposium in the next 48 hours (scheduled for 10:05am ET Friday) and gold’s near-term trajectory will likely be guided by this significant event. 

Interestingly, the pound is bucking the trend of a softer US dollar. The GBPUSD weakened to $1.2716, as traders digested the UKs equally weaker-than-expected PMI data. The latest UK Private Sector Output Fell the most in 31 months (about 2 and a half years). 

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