Last week, gold prices surged to a historic high, briefly surpassing $2,510 per ounce. However, after testing this peak, the precious metal has started to pull back as it undergoes a retracement phase.
By the end of the week, gold settled at $2,470, just shy of a critical resistance level after rebounding from midweek lows—an impressive performance despite the current pullback.
Gold finished the week with its highest closing price in history pic.twitter.com/XMb5A84BVQ
— Barchart (@Barchart) August 18, 2024
Midweek Recovery Amid Economic Data
Gold remained steady at the start of the week, trading around $2,450, as traders anticipated significant U.S. economic data.
The calm was interrupted midweek when lower-than-expected Consumer Price Index (CPI) data fueled hopes for a Federal Reserve rate cut in September. However, the excitement faded despite strong retail sales (up 1%) and a drop in jobless claims (to 227,000).
These positive economic indicators strengthened the U.S. dollar and Treasury yields, putting pressure on gold and contributing to its recent pullback.
Geopolitical tensions in the Middle East provided some support for gold prices earlier in the week.
Despite a midweek dip, gold prices recovered and briefly hit an all-time high of $2,510 as investors speculated on potential Fed rate cuts. However, as the week progressed, gold began to retrace from these highs.
What to Watch This Week
Gold traders are preparing for a week packed with significant economic data releases that could heavily influence gold prices.
Key Events: Watch for the U.S. S&P Global PMI release and the Jackson Hole Symposium, where Fed Chair Jerome Powell is expected to clarify the Fed’s interest rate strategy.
Interest Rate Speculation: According to the CME FedWatch Tool, there's a 72.5% probability of a 25 basis point rate cut in September, a key factor for gold traders.
Geopolitical Tensions: Ongoing conflicts in the Middle East, particularly between Israel and Hezbollah, and U.S.-China trade tensions could drive demand for gold as a safe haven.
Hence, both economic data and geopolitical developments are likely to play crucial roles in shaping gold's price.
Gold Price Chart - Source: TradingView
Gold Price Outlook
Gold is currently trading around $2,490 after completing a 23.6% Fibonacci retracement from its recent high. The formation of a bearish candlestick suggests a potential further downside.
Key levels to monitor are the 38.2% and 50% Fibonacci retracement levels at $2,480 and $2,471, respectively. This zone is a significant demand area, and if gold consolidates above it, the chances of a bullish continuation increase.
Conclusion: Keep a close watch on the $2,480 to $2,471 zone; consolidation here could spark further upward movement in gold prices, though the recent pullback indicates that traders should remain cautious.