Gold prices recovered during Friday’s session after declining the previous day, supported by another round of softer US economic data. However, the rebound faces challenges as rising oil prices add pressure to the outlook, leaving gold at a key turning point after last week’s strong advance.
Gold outlook: Softer US data supports prices
The fundamental backdrop for gold has improved in recent weeks. Disappointing payroll figures, softer consumer sentiment, weaker retail sales, and broadly in-line inflation data have increased expectations that the Federal Reserve may keep interest rates unchanged at its September meeting.
While the US dollar has weakened, bond yields remain elevated, creating a significant risk factor for gold and other low-yielding assets. Higher yields could continue to limit upside potential for the precious metal while also weighing on broader equity markets.
Oil prices remain a key factor for gold
The next major driver for gold prices remains the outlook for crude oil and developments in the Middle East. Oil prices recovered after Thursday’s decline as uncertainty surrounding the Strait of Hormuz and the lack of progress toward a US-Iran agreement continued to influence energy markets.
Higher oil prices create a challenge for gold because rising energy costs could push inflation higher. A renewed increase in inflation expectations could make it more difficult for the Fed to ease monetary policy, potentially supporting bond yields and the dollar, both of which could pressure gold.
Gold technical analysis: Resistance remains near $4,455
From a technical perspective, gold is approaching an important resistance area between $4,365 and $4,455. The metal has tested this region multiple times this week but has not yet achieved a decisive breakout above it.
This resistance zone is significant as it combines a previous swing low with an area that has shifted from support into resistance.
On the downside, initial support is located around $4,300 to $4,305, followed by the $4,200 level. A deeper decline could bring the more important support zone around $4,100 to $4,120 into focus.
Gold rally requires further confirmation
Gold remains positioned as a potential beneficiary of a more dovish Federal Reserve outlook. The recent rally showed how quickly prices can respond when expectations for the dollar and interest rates shift in favour of precious metals.
However, the lack of stronger follow-through this week suggests that momentum may be slowing. A sustained move above the current resistance zone would strengthen the case for a new bullish trend, while failure to break higher could support the view that gold remains within a broader consolidation phase.
For now, the outlook for gold has improved, but the upside remains vulnerable. Unless Treasury yields move lower, the metal may struggle to maintain a breakout beyond its current resistance levels.
