Gold is consolidating just above critical support after posting its best monthly performance since January, gaining almost 10% in August. Technical signals point toward a possible breakdown, but the metal's next move now hinges on the dollar, Treasury yields and the Federal Reserve's rate path.
Gold Tests $4,445 After a Confirmed Double Top
Gold is clustering near make-or-break support at $4,445, which aligns with the 38.2% Fibonacci retracement, after a heavy sell-off. A close below that level could open the door to a deeper correction, first toward $4,355 and potentially as far as $4,260. Resistance sits at $4,594, a ceiling that has so far held.
The setup follows a fully formed double top at $4,755, a pattern that typically signals a reversal is underway. Momentum still favors the bears: the MACD is diving deeper, at -41.79 versus -27.83 previously, and price remains below the Ichimoku cloud. Yet the RSI has dropped to 34.06, edging toward oversold territory, which suggests sellers may be tiring even as the trend stays down. The longer-term SMA(200) still points up, keeping the broader uptrend technically intact.
Dollar Weakness Fueled August's Rally
This technical strain follows a strong month for the metal. Gold soared almost 10% in August, its best performance since January, despite losing more than 3% after Kevin Warsh's hawkish Jackson Hole speech and an escalation of the conflict in the Middle East. That escalation pushed Brent crude above $90 a barrel, raising the risk of faster inflation and tighter Fed policy.
A weaker dollar underpinned the rally. The US dollar index fell over August as the Treasury signaled it wants to lower long-term Treasury yields, inflation slowed, the labor market cooled and traders saw a reduced chance of Fed tightening. However, the probability of a federal funds rate hike at the next FOMC meeting jumped above 60% at the turn of the month, letting the dollar index partly recoup its losses.
Yields at 19-Year Highs Cloud the Outlook
Confidence in the Fed chair may now decide gold's next leg. According to Donald Trump, Warsh will ultimately do what he is supposed to do, while Scott Bessent argues the Treasury and the central bank are working in tandem and makes the case for holding interest rates unchanged at the next meeting. Wells Fargo, by contrast, believes the dollar will weaken by the end of September as the Fed disappoints markets, which would extend gold's uptrend.
Working against that view, 10-year Treasury yields are at 19-year highs as global debt-market yields return to levels last seen in 2008. It is believed that gold, which pays no interest, cannot compete with Treasuries when rates are rising. That tension between a possible dollar slide and stubbornly high yields leaves the metal's recovery an open question.
Sources: Investing.com, FxPro Analyst Team via Investing.com
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