Last week, we made the case that gold and silver weren't waiting for a September Fed meeting to bottom and that a market refusing to break down after absorbing every piece of bad news isn't weakness; it's a spring compressing. This week, the spring released. Gold posted its best week since January, and December futures that were consolidating near $4,100 just traded through $4,400. The turn we mapped is underway, and every Sunday in our Navigating the Week Ahead report, we lay out the key levels and setups before the trading week opens. If you want to be positioned for the next leg instead of chasing it, sign up here.
To understand why this week mattered so much, go back to March 2nd. That was the day crude oil gapped higher, and gold fell $250 an ounce in the same session. From that moment forward, the market was pricing one story: rising energy prices feeding the inflation numbers, and a Fed forced to sound tougher than the economy warranted. Gold spent five months fighting that theme.
This week, the entire story reversed. Crude fell roughly 7%, which strips away the very thing that was keeping the Fed hawkish. Yields put in a lower high, with the 2-year pressing down against its 50-day moving average. Then Friday morning delivered the exclamation point: the July jobs report showed the economy lost 23,000 jobs against expectations for a gain of 80,000. Expectations for a September rate hike collapsed. Everything that pushed gold down since March 2nd is now running in the other direction.
Daily Gold Chart
What we find most compelling is what's underneath the price. Central banks never left and official purchases are running 62% higher year over year, while China's central bank is stockpiling gold in Hong Kong to support the city's push to become a major bullion-trading hub. Meanwhile, ETF flows are turning higher but remain down 2.1% year to date — retail is only now coming back, and this rally has happened almost entirely without them.
The playbook from here is straightforward. Markets that reverse a five-month narrative in a single week rarely go straight up; they pull back, retest, and shake out late arrivals. We view those dips as buying opportunities. Former resistance near $4,280 and the $4,236 area are the zones we're watching, and as long as rate-hike expectations continue to fade, we believe this market has the fundamental fuel to retest $5,000 before year-end. To get a look at the roadmap ahead, please be sure to register for our Navigating the Week Ahead report.
Performance Disclaimer
Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.
One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading.
For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points that can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program that cannot be fully accounted for in the preparation of hypothetical performance results all of which can adversely affect actual trading results.
