Gold (XAUUSD) may have bottomed and has the potential to stage a bullish reversal, supported by multiple factors.

Fundamental Analysis

1. The recent rally has mainly been driven by a decline in market expectations for a Fed rate hike, reflecting:
• Progress in peace talks has increased the likelihood of the Strait of Hormuz reopening, pushing oil prices lower and easing inflation concerns.
• Employment data have also signalled a slowdown. ADP showed that private-sector employment increased by only 44,000 jobs in Jul, below expectations and down from the previous month.
• Regarding inflation, oil prices have yet to fully recover, suggesting that inflation risks may be less severe than previously feared.
• Markets consequently reduced the probability of a Fed rate hike in Sep, pulling Treasury yields and the US dollar lower. This supported gold due to its non-yielding asset.

2.The main risk remains a potential rise in US Treasury yields if Japanese authorities sell Treasury holdings to fund yen intervention. However, the recent US–Japan cooperation to support the yen may allow the authorities to intervene without directly selling Treasuries. The announcement has therefore eased concerns of bond sell-off.

3. Against a backdrop of persistent geopolitical tensions across multiple regions, gold’s role as a safe-haven asset remains intact. Following a substantial decline of approximately 29.6%, gold may offer an opportunity to buy at a discount.

4. Tomorrow’s NFP report could trigger some downside pressure, although any pullback may be short-lived.

Technical Analysis

5. On the broader timeframe, XAUUSD had been declining since late Jan before reaching a low of approximately 3,945 in late Jun. Under Elliott Wave Theory, the completion of the three-wave A-B-C correction suggests that the five-month bearish cycle has ended.

6. After reaching the bottom, XAUUSD traded sideways in the lower zone for an extended period and formed a triangle pattern. The subsequent breakout above the sideways range confirmed a potential bullish reversal.

7. The price surged toward EMA200 before the rally paused and a temporary pullback emerged. As the broader structure now indicates a bullish reversal, the decline may represent only a brief consolidation before the uptrend resumes.

8. The first support is at 4,220, followed by 4,195 near the 38.2% Fibonacci Retracement level.

9. The next potential target is around 4,530.

Analysis by: Krisada Yoonaisil, Financial Markets Strategist at Exness