Key Takeaways:
- Gold fell 3.65% to $4,454.99 an ounce, losing its 200-day moving average
- The 20-day MA near $4,410 is key to keeping the $4,780 recovery target alive
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Gold breaks 200-day average as $4,410 support comes into focus
Gold fell 3.65% to $4,454.99 an ounce on Aug 28, breaking below its 200-day moving average and testing support near the 20-day average at $4,410.
The session low of $4,445 breached potential support near the prior trend high of $4,450, according to Bruce Powers, senior analyst at FX Empire. Trading remained near session lows at the time of writing, leaving the $4,445 level exposed to further downside.
The 20-day moving average near $4,410 stands out as the key support that could decide whether the decline stays corrective. On the bullish reversal breakout day of Aug 5, support at the 20-day average was successfully tested at the day's low, launching a rally that carried to Tuesday's trend high of $4,697 and completed a 50% retracement of the prior internal decline that followed the January peak of $5,597.
A measured move from the recent breakout of a bullish pennant pattern points to $4,780, a target reinforced by the 50% retracement of the full decline from the January peak and a prior lower swing high. Reclaiming the 200-day moving average, currently near $4,529, would be a key sign of strengthening and could open the way for a third leg higher off the bottom.
$4,410 Support Holds the Key to the $4,780 Target
Because this is the first pullback following a significant breakout above both the downtrend line and the 200-day moving average, an eventual recovery is still anticipated. That outlook begins to change if support fails to hold near the 20-day moving average. Should that average give way, Friday's loss of the 200-day moving average would look like more than a brief interruption in the larger advance.
Silver Nears $70 as Gold Breaks 200-Day Average
The breakdown comes as Fed Chair Kevin Warsh revived September rate-hike bets, pressuring the precious metals complex. Gold's move lower follows a run that saw the metal reach a near three-month high of $4,696.82 intraday on Aug 25, according to TradingKey data. Silver, which rose 6.56% last week, has consolidated near $68.20 after testing the $70 resistance, with the 20-day moving average and $66.5 as key downside supports. A decisive breakout above $70 could open a path toward $80, according to TradingKey.
The near-term direction for both metals hinges on US PCE inflation data and further signals from Warsh, whose Jackson Hole remarks revived bets on a September rate increase. If inflation cools and rate-hike expectations ease, the dollar and Treasury yields could come under pressure, supporting gold and silver. A rebound in the dollar, by contrast, could extend the pullback in both metals.
This article is for informational purposes only and does not constitute investment advice.
