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Gold Extends Breakout as Dollar Weakness Fuels Rally
Traders' Opinions
Summary:
Gold extends its breakout to the highest level since late May, supported by a weaker Dollar and reduced near-term Fed hike expectations. Higher Oil prices and persistent US-Iran tensions remain the main risks to further upside.
Buy
CLOSEDXAUUSD
End Time
4595.00
Entry Price
4950.00
TP
4300.00
SL
4660.83 +3.71 +0.08%
5173
Points
Profit
4300.00
SL
4646.73
CLOSING
4595.00
Entry Price
4950.00
TP
Gold extends its advance on Friday, pushing to its highest level since late May as persistent US Dollar weakness continues to provide a favourable backdrop for the precious metal. XAU/USD is also heading toward a third consecutive weekly gain, with buyers maintaining control following the latest breakout.
The Dollar remains the primary source of support. Softer US inflation figures have encouraged traders to scale back expectations for an immediate Federal Reserve rate hike, leaving the Greenback close to the three-month low reached on Thursday. With the opportunity cost of holding non-yielding assets becoming less restrictive, Gold has continued to attract demand.
The policy picture, however, is far from completely dovish. Minutes from the Fed’s July meeting showed officials remain prepared to tighten further if inflation fails to make sufficient progress. Markets are still assigning roughly a 68% probability of at least one rate increase before year-end, suggesting investors have delayed rather than completely abandoned expectations for additional tightening.
Oil prices remain the biggest complication for that outlook. The continuing US-Iran confrontation over the Strait of Hormuz, combined with attacks on shipping linked to the conflict, has pushed crude prices higher and renewed concerns that energy costs could feed another wave of inflation. Elevated inflation expectations could keep longer-term Treasury yields supported even as the Treasury’s expanded bond-buyback programme attempts to ease pressure further along the yield curve.
Geopolitical tensions are also keeping safe-haven flows active. President Donald Trump has threatened significantly tougher economic measures against Iran and penalties against countries helping Tehran circumvent US restrictions. Washington’s increasingly aggressive economic stance reduces expectations for a quick resolution and keeps the risk premium surrounding both Gold and Oil elevated.
Gold currently has the stronger hand despite the conflicting macro signals. The combination of a softer Dollar, reduced expectations for an immediate Fed hike and persistent geopolitical uncertainty continues to favour buyers. The main threat to the rally would be another sharp rise in Treasury yields as markets price the inflationary consequences of higher Oil prices. Until that translates into a meaningful Dollar recovery, however, dips in Gold are likely to continue attracting buying interest.
Technical Analysis
Gold has shifted into a decisively bullish phase on the 4-hour chart, with the latest acceleration carrying XAU/USD through the $4,500–$4,550 resistance zone and toward the $4,600 handle. The move represents a significant technical development, as this region had previously acted as a major barrier during May. The broader recovery from the late-June base around $3,950 has now developed into a clear sequence of higher highs and higher lows, suggesting buyers are increasingly taking control of the medium-term structure.
The immediate focus is now on whether Gold can establish itself above the $4,500–$4,550 breakout area. Following such a sharp advance, a short-term retracement would not be unusual, and a return toward this zone could provide an important test of underlying demand. If former resistance successfully converts into support, the breakout would gain further credibility and could provide the platform for another impulsive move higher. In my view, weakness toward this region would remain corrective while buyers continue to defend it.
A decisive return below $4,500 would not immediately invalidate the broader recovery, but it would increase the likelihood of a deeper retracement. In that scenario, attention would shift toward the $4,260–$4,300 demand zone, which represents the next major structural support visible on the chart. A sustained break beneath this area would represent a more meaningful deterioration in momentum and could expose the broader $3,950–$4,000 base.
On the upside, the next major technical objective sits around $4,900–$4,950. This is the most prominent resistance zone above current prices and represents an important historical supply area. A sustained break through $4,950 would mark another major bullish development and could trigger an acceleration toward the $5,000 psychological level. Beyond there, the chart leaves relatively little established resistance, with the projected continuation structure pointing toward approximately $5,350–$5,400.
Overall, the technical picture remains heavily tilted toward buyers. The recovery from $3,950 has gathered considerable momentum, previous resistance levels have progressively been reclaimed, and Gold is now attempting to establish itself above one of the most important barriers on the chart. As long as $4,500–$4,550 holds as support, I would favour continuation toward $4,900–$4,950, with $5,000 becoming increasingly realistic if momentum persists.
TRADE RECOMMENDATION
BUY GOLD
ENTRY PRICE: 4,595
STOP LOSS: 4,300
TAKE PROFIT: 4,950
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