The gold market has been very bullish during the course of the month of August, with traders out there thinking that the Federal Reserve is going to hesitate raising rates, and the US dollar has been the main driver lately.
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The gold market has been very bullish during the course of the month of August as traders are starting to bet on the idea that the Federal Reserve may stop with their tightening policy. But we have a lot of concerns out there to pay close attention to, as the handful of regional Federal Reserve members out there have stated that they are still looking for rate hikes. So the question is, who does the market believe: the narrative that the Federal Reserve is sending out there, or the narrative that Wall Street is currently talking about?
We find ourselves near the $4,700 level, and if we can break above the $4,800 level, it's a situation that could see gold really start to take off. Short-term pullbacks make a certain amount of sense and could be thought of as buying opportunities, because it is worth noting that we have bounced significantly during the last 4 or 5 weeks from a nice uptrend line that goes all the way back to 2024.
Technical Support and Federal Reserve Policy
I like the idea of buying dips on bounces unless, of course, the Federal Reserve sounds extraordinarily hawkish. In that environment, I'm not necessarily looking to short this market, at least not until we break down below the $4,000 level. So, I'm looking for buying opportunities in September as the overall trend has dictated.
But I also recognize that the entire thing could be thrown by the next couple of weeks quite significantly in one direction or the other. But the overall longer term still favors the upside. So, I believe at this point in time, it's more likely than not going to be a buy on the dip attitude based on the momentum of the chart.
But I also recognize that if the market were to see a complete shift in attitude, there is a lot of order flow sitting underneath where traders had gotten in. So, the path of least resistance, even though it looks like we're struggling a bit at the moment, is still to the upside, and I do not think this is going to change, although I am the first to admit a sideways market for a while could be in order as well. I am either bullish – or neutral in September.
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