Gold breaks records and tops out: Where next?Gold achieved a historic breakthrough to $3,759 per ounce, potentially driven by an unusual "barbell strategy" where investors simultaneously bought risk assets while hedging against systemic risks.
On the one hand, continued expectations for two additional rate cuts by year-end supported non-yielding assets. On the other hand, political uncertainty increases as Trump prepares to meet with lawmakers on funding proposals. The probability of a Gov shutdown approaches 70% by October 1st, which would force the FOMC into a 'blind' meeting in October.
Technicals
The short-term setup shows a double top formation at $3,759, suggesting potential consolidation rather than immediate continuation.
Resistance Levels : $3,800 is a critical resistance, both a Fibonacci extension cluster and a psychological level
Support Levels :
Immediate support at $3,740 (breakout confirmation level)
Secondary support at $3,700-$3,730 (previous consolidation zone)
Deeper pullback potential to $3,673 (61.8% Fibonacci retracement)
Wave Structure : Elliott waves suggest completion of a potential Wave 3, with consolidation expected before a possible fifth wave extension toward $3,785-$3,800
Forward Outlook
The setup favours consolidation over the remainder of the week, with key events including Fed Chair Powell's speech and Friday's PCE inflation data serving as potential catalysts for the next directional move.
The momentum divergences suggest limited downside risk from current levels, making any pullback toward $3,700-$3,740 a potential buying opportunity for the anticipated final leg higher toward the $3,800 resistance zone.
Risk management remains crucial given the proximity to potential reversal levels and the unusual nature of gold's correlation with equity strength.
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