Introduction
Gold is at an important level now because the 4,600–4,622 zone that had capped every rally since June has finally broken, and price is holding well clear of it at 4,702. That is a 6.7% move in three sessions, and it came off the back of the reclaim setup we flagged on 19 August, which cleared both targets and kept going. With that ceiling gone the next real supply sits at the 4,800 shelf from early May. The reason this level matters so much is that if price falls back beneath 4,622 the breakout loses some of its initial strength and it might mean we see a deeper pullback to $4,400 or lower.
At the moment however, bulls are in control again of the yellow metal so lets take a closer look at the technical analysis and if there are any possible trades.
The Yield Reversal, in Context
- Treasury’s buyback plan flipped the yield story. The department announced it would at least double its long-term debt buybacks to contain borrowing costs, sending Treasury yields and the dollar sharply lower. Gold jumped more than 4% on 19 August alone, which is the single session that broke this ceiling.
- The debt backdrop is doing the rest. US national debt hit a record $40 trillion this week, five months after passing $39 trillion, with annual interest costs now exceeding defense spending. Central bank buying reached a quarterly record 289 tonnes in Q2, up 74% year-on-year.
- Iran cuts both ways here. The US campaign to intensify economic pressure has weakened hopes of a quick Strait of Hormuz reopening, keeping oil elevated. That supports gold’s inflation-hedge appeal but also limits how far rate expectations can fall.
The bigger picture: the exact variable that was capping gold a week ago — rising long-end yields — has reversed, and that is why this breakout has legs the earlier attempts lacked. Warsh delivers his first Jackson Hole keynote later this week on the 28th of August, and anything he signals on the policy path lands directly on this trade.
Possible Trades
Chasing this market higher now might not be the best play because Gold has already had a solid run and a small retracement might be coming soon.
On the chart below, we have a 9 and a 18 moving average, ideally we see a pullback into that zone and a bullish reversal candle from which we can enter at. We can see though, that the market this high, a pullback is the stronger play before taking a long.
Trading futures involves substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. This analysis is for informational and educational purposes only and does not constitute financial advice. Always conduct your own due diligence and consult with a licensed financial advisor before making any trading decisions.
