Gold Smashed 3.2% as Warsh Strikes a Hawkish Refrain

Gold Talking Points:

• Gold held resistance inside of the $4700 level last week and then dropped dramatically on Friday following the Kevin Warsh speech at Jackson Hole.
  It was a near mania as we came into the week but those gains were erased on a brutal Friday session.
• Into the weekly close there’s support at prior resistance, around 4450, with the big question of bullish aggression as we go into next week.
• I looked into this along with ES and Bitcoin in the Friday video for StoneX.com, linked below.

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I was hoping to see a hawkish Kevin Warsh at his Friday speech in Jackson Hole and that’s precisely what arrived, driving a jolt across global markets as a rush of USD-strength propped USD/JPY above 160.00 and gold reeling to its largest daily decline in more than two months.

There was an overbought RSI signal on Thursday and that pushed through to a steep decline on Friday, but for next week, the question is whether buyers show up for a ‘perceived value’ as the trend that was so hot last week and after the prior week Treasury buyback announcement has now pared back to the resistance that was in-play before the prior breakout.

Gold Daily Price Chart

Chart prepared by James Stanley; data derived from Tradingview

Gold Next Week

For next week the question is whether bulls respond now that the broader trend has pulled back, and the $4500 level is now a significant line in the sand. This could initially be seen as a spot of possible lower-high resistance, but if bulls are able to sustain rallies above that important price, it can be seen as a marker of resilience.

As I shared in the above video, the backing fundamental environment seems to still favor gold as the prospect of austerity and lower government spending aren’t really up for debate. And even the Fed’s hawkish push brings with it question marks as this is similar to Kevin Warsh’s first two appearances at FOMC meetings and in both, he had the chance to hike even with inflation higher than it is today. Yet, in neither did he push for such a move so this still seems a case of talking tough but really trying to keep economic activity strong.

Gold Four-Hour Price Chart

Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Market Analyst, Global Macro