Gold continues to extend consolidative mood since the end of May | investingLive

The confusion surrounding US tariffs threatened to stir something up at the start of the month but ultimately, it all fizzled as the speculation got debunked. In that lieu, spot gold prices also failed to gather much excitement and we’re seeing the consolidative mood extend further now into the third week of August. It has been this way for gold since the end of May.

So, what’s next for the precious metal?

The fundamental catalysts for gold are still very much in play and remain clear. As the Fed aims to cut rates, it acts as another tailwind for gold in the bigger picture. Then again, the more hawkish Fed in the past year hasn’t really put a dent in gold prices anyway. So, there’s that argument to make.

Besides that, the threat of tariffs inflation could lift demand in gold act as a hedge and there’s also ETF buying in catching up to the spot price. But perhaps the biggest tailwind remains that central banks across the globe are still buying into gold. And the most notable one is of course China here.

It’s a sign of the times as markets are also losing confidence in the dollar amid Trump’s policy incoherence and credibility attacks against the Fed and BLS.

But at this stage, I would argue that a lot of everything is priced into what we’re seeing with gold. The consolidative mood above speaks to buyers needing another major catalyst to spark the next upside breakout/leg – one that takes it above $3,500.

However, the technical picture is starting to close in on them and present some risks. As gold is trapped longer in this range, technical exhaustion is a key challenge that could bite at buyers’ appetite. That especially with the 100-day moving average (red line) starting to close in on price action.

We already saw a test of that at the end of July and it looks to be once again starting to come into the picture in August. The key level is seen at $3,307 currently. As a reminder, gold has not firmly broken below the level since October 2023. That speaks to the bullish run and upside momentum in the precious metal since last year already.

As such, if there is a key break there, it could trigger technical stops on the way down and lead to a quick and sharp pullback in prices. The May lows around $3,120-54 will be a key line in the sand on any major retracement before talking about the 200-day moving average (blue line).

But given the fundamental backdrop above, I’ll preach what I have been saying for almost a decade now. Gold will still remain a buy on dips on any significant technical pullback. It’s another chance to add to longs and reload for those who scaled out.