To The Moon

On September 14, the international gold market showed a downward trajectory last week, with prices closing lower after a brief rebound attempt. Despite failing to break below the 60-week moving average support, the metal remains under pressure, suggesting that short-term price action will continue to fluctuate within a consolidation range.

Key influences included escalating tensions in the Middle East, which drove oil prices higher for consecutive sessions, alongside stronger-than-expected US inflation data that pushed the probability of a Federal Reserve rate hike to nearly 90%. These factors weighed heavily on gold prices. However, fresh diplomatic mediation efforts led to a notable pullback in oil prices, easing inflation concerns and rate hike expectations. Combined with bargain hunting at lower levels, gold managed a modest recovery but still closed the week in negative territory. In the near term, the bearish pressure appears to be easing, though the consolidation phase is likely to persist.

Looking at the detailed price action, gold opened the week at $4,427.17 per ounce before hitting a weekly high of $4,442.78 on Tuesday. Prices then trended lower in a choppy manner, reaching a weekly low of $4,291.83 on Friday before staging a recovery. The metal ultimately settled at $4,346.36, recording a weekly range of $150.95 and a net decline of $80.81, or 1.83%.

Looking ahead to Monday, September 14, international gold opened lower and traded sideways. The initial weakness stemmed from Saudi Arabia's decision to shut down its east-west oil pipeline, coupled with the postponement of a diplomatic meeting in Oman between Iran and Gulf Arab states regarding the Strait of Hormuz. Additionally, another tanker attack on Sunday pushed oil prices higher at the open, weighing on gold. However, prices found support at the 100-day moving average and have since traded with a slight upward bias.

Nevertheless, technical indicators and broader fundamentals remain tilted toward the downside. Any rebound attempts are likely to be limited in scope. Unless current conditions change, the path of least resistance appears to be a gradual decline, offering opportunities for both bulls and bears in the near term.

From a fundamental perspective, the precious metals market this year will continue to be driven by inflation data, employment figures, and expectations surrounding Federal Reserve policy. The latest August US non-farm payrolls report came in significantly above expectations, with upward revisions to June and July data as well. This reinforces the market's view that the Fed will maintain its hawkish stance in the short term, thereby capping gold's upside potential. Furthermore, the August CPI data released on September 11 remained broadly in line with expectations but still showed elevated price pressures, which increases the likelihood of further rate hikes and adds downward pressure on bullion.

Geopolitical tensions remain at an impasse with escalating risk levels. For oil prices, this environment could sustain elevated levels or push them even higher, keeping inflation expectations persistently elevated. This, in turn, reinforces the Fed's hawkish outlook and limits gold's upside momentum.

However, it's important to note that this inflationary pressure stems primarily from rising oil prices rather than demand outstripping supply or an excess of money chasing too few goods. It is not driven by an overheating economy, surging consumption or investment demand, or expansionary government spending. Instead, this is a classic case of cost-push inflation driven by rising production costs, which could potentially trigger stagflation. In such a scenario, the Fed would likely opt to maintain its current policy stance rather than rush into further hikes.

While there remains a possibility that elevated inflation expectations could force the Fed's hand into additional rate increases, which would pressure gold prices and potentially lead to a retest of the June lows (as suggested by the monthly chart, which still points to the potential for new downside), historical context provides some reassurance. Reviewing the three major oil crises of the past, each eventually resolved with oil prices peaking and then retreating, and each was followed by economic recessions in the West. Although the Fed was ultimately compelled to raise rates in each instance, gold did not experience sustained declines and ultimately entered new bull markets.

Therefore, for short-term traders focusing on daily or weekly moves, fundamental outlook and directional trends may be less critical. Meanwhile, long-term holders, such as those accumulating physical gold or gold accumulation plans, can consider scaling into positions at current lower levels.

On the technical front, the weekly chart shows gold trading above the middle Bollinger Band, with the bands showing a tendency to contract. However, the momentum indicators remain bearish, suggesting the possibility of a multi-month sideways consolidation with further downside risk. Nevertheless, the long-term outlook remains constructive, with expectations of new highs eventually. As such, support at the middle Bollinger Band or the 30-month moving average could represent attractive entry points for long-term bullish positions.

The weekly timeframe also reveals that gold has tested the 60-week moving average support for two consecutive weeks without breaking below, indicating underlying buying interest. However, significant overhead resistance persists, and near-term price action is likely to remain range-bound with downside risks. Key short-term resistance is seen at the 30-week moving average, with a more critical reversal level at $4,725. A breakthrough above this level could potentially drive prices toward $5,100 and even $5,700. On the downside, the 60-week moving average remains crucial support, and a break below could trigger a retest of the ascending trend line, which would still represent a buying opportunity.

On the daily chart, gold continues its downward drift, but the bearish momentum signals are gradually weakening. This suggests the potential for a rebound and a shift back to upward momentum. Support at the 60-day moving average remains a viable entry point for bullish positions, while resistance at various moving averages serves as interim targets.

For intraday trading reference, key levels to watch are as follows - for gold: immediate support is seen at $4,315 or $4,250, while resistance is noted at $4,390 or $4,435. For silver: support is identified at $63.30 or $62.50, with resistance at $65.10 or $66.15. Actual entry and exit points will be provided based on real-time market conditions.