Gold: Long-Term Consolidation Could Precede Major Breakout if $3,400 Holds

LONDON (August 26) Gold ended last week 1% better off after Fed Chair Jerome Powell signaled on Friday that rate cuts could arrive as soon as September. After a brief pause on Monday, the yellow metal has pushed a little higher again, helped by political nerves in both the US and Europe.

While equities have been unsettled a little by these developments, gold has quietly held firm – a sign that investors are willing to keep leaning bullish, even if the market is still caught in consolidation mode.

It is worth watching the US dollar this week, as we will have more data to look forward. If the Fed edges further towards easing while political turmoil continues to gnaw at confidence in US policymaking, the US dollar is likely to remain under pressure – an environment that typically favours gold. The main caveat to the current bullish gold trend is if investor continue to pour money into the racier stock market, which could keep the appetite for haven demand low.

Fed Independence Questioned: Cook’s Removal

Markets were rattled in Asian trade when news broke that President Trump had dismissed Fed Governor Lisa Cook over alleged mortgage irregularities. Cook disputes his authority to fire her, meaning the courts will now decide whether she stays, or the Fed is left one member short.

With Adriana Kugler having recently resigned and Stephen Miran brought in, the balance of the board already tilts more towards Trump’s stance. That raises concerns over Fed independence – a narrative investors dislike. For the US dollar, this is a clear negative; for gold, it’s another supportive tailwind. But is it enough to trigger a breakout above the key $3,400 resistance remains to be seen.

Investing.com