GOLD consolidates after Friday’s 3.2% drop, sparked by hawkish comments from Fed Warsh

Gold remains at the back foot on Monday, but bears found temporary footstep at $4400 zone (Fibo 38.2% of $3942/$4697 recovery leg / 20DMA) and consolidate after Friday’s 3.2% fall (the biggest one-day loss since June 10).

Gold was deflated by hawkish comments from Fed Chair Warsh in Jackson Hole symposium which boosted expectations for rate hike and inflated US dollar.

Fresh escalation in the Middle East, when the US and Iran exchanged fire over the weekend, after a relatively quiet period, revived uncertainty and inflation fears that may further darken metal’s near-term outlook.

Reversal pattern is forming on daily chart after gold has registered the first weekly loss after three consecutive weeks in green, though firm break of cracked $4400 support zone is required to verify the signal (and sideline scenario of a healthy correction of $3942/$4697 upleg, before bulls regain control).

However, momentum studies on daily chart are still positively aligned and stochastic is about to enter oversold zone (MAs are in mixed setup) that may provide more headwinds to fresh bears.

Watch reaction at $4400 and $4370 (100DMA) break of which would further weaken near-term structure and increase downside risk.

Conversely, return and close above 200DMA ($4327) would revive bulls and signal a higher low.

Res: 4510; 4527; 4575; 4600
Sup: 4400; 4370; 4329; 4304