Gold Price Weekly Forecast

Gold prices surged on Friday closing in towards the 1,964.50-resistance level, fully reversing Thursdays losses. The precious metal received a boost from a weaker US dollar after the US Federal Reserve announced a prolonged low interest rate strategy.

Fed Chairman Jerome Powell revealed the central banks new inflation targeting policy at the Jackson Hole meeting on Thursday which helped spur on gold bulls. The new strategy opens the door to higher inflation levels above the 2 percent target without any risks of interest rate hikes by the Fed, weighing heavily on the greenback.

Meanwhile, global central banks and governments have been pumping massive amounts of cash into the markets through their stimulus programs which have helped gold gain over 28 percent so far this year. Gold is highly sensitive to inflation expectations as it is often seen as an adequate hedge to rising prices.

Furthermore, without the threat of increases in interest rate levels, gold bulls are building a strong case for upside potential in the yellow metal as the opportunity cost to hold it decreases when interest rates remain low.

Critics of the Feds inflation targeting policy have pointed out however that the central bank has thus far failed to stir up any substantial rises in inflation levels and therefore see this new move as unlikely to hold any bearing on increases in inflation reading for the near future, weighing on the possibility of strong gains in gold prices. After all, the last time we have seen inflation levels at 2 percent was back in 2012.

From a technical perspective, gold failed to clear the 1,964.50 hurdle suggesting bulls still do not have enough momentum to steer the market in their direction. The likely outcome in the coming week will be further sideways price action under the 2,000 bar with the expected range remaining between 1,980 and 1,900.

(Chart Source: Tradingview 30.08.2020)

Momentum has wobbled from the neutral to bearish positions, with a move below the pivotal 1,946.29 marks likely to trigger a stronger correction towards the upward trending support line. On the upside, the 0.618

Fibonacci retracement level at 1,976.66 should offer strong resistance in the upcoming sessions. Traders may look into cautiously longing the metal up to the 1,976 handles at the start of the week before entering into short positions with a target around the 1,940 supply zone.

Support & Resistance Levels:

R3 2,000.00

R2 1,976.66

R1 1,964.50

S1 1,946.29

S2 1,915.91

S3 1,900.00

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.