On August 20, gold prices broke out of a long-standing stagnation, surging to $2,531 per ounce, setting a new historical high. This reflects the market's strong enthusiasm for gold. In terms of employment data, U.S. job creation was later revised down, showing 818,000 fewer jobs than previously expected, raising concerns about the economic outlook possibly being less optimistic than anticipated. Additionally, the latest minutes from the Federal Reserve's meeting hinted at a preference for a rate cut during next month's policy meeting. Following this announcement, the U.S. dollar index dropped to a seven-month low.

Furthermore, after Fed Chair Jerome Powell clearly signaled a rate cut in September during the annual central bank symposium, both the U.S. dollar and Treasury yields fell across the board, while gold prices took the opportunity to challenge the $2,530 level again. Market analysts believe that as long as Powell continues to express concerns about the job market's outlook, gold will be driven to continue its upward momentum. In fact, over the past week, large speculators have significantly increased their net long positions in gold to the highest levels since early 2020, leading me to believe that gold still has room to rise in the future.

From a technical standpoint, gold's daily chart remains bullish. However, the sharp rise in gold prices in the short term has caused the relative strength index (RSI) on the hourly chart to show an overbought condition, and the price has failed to break through the previous high of $2,531.60. Therefore, there is a concern about facing short-term selling pressure. Investors should remain cautious about further increases in gold prices, keeping an eye on support levels at $2,500, $2,480, and $2,440. If gold experiences significant downward pressure and breaks below $2,480, it may return to the blue oscillation zone and potentially decline further to the support level of $2,440. However, even if such a correction occurs, the overall bullish trend in gold remains intact. For now, investors need to closely monitor upcoming Federal Reserve meetings, employment data, and other key economic indicators, as well as changes in geopolitical situations, as these factors will influence the future performance of gold prices.

Hugo Leong

Gold Analyst of Hantec Group