Gold’s break above a minor resistance raises the odds that the seven-month decline may have run its course.
XAU/USD has risen above a vital barrier at the early-July high of 4202. Since the decline began, this is the first time the yellow metal has broken a resistance level. Hopes of a diplomatic resolution in the Middle East, easing concerns of an imminent US interest rate hike, and deeply oversold conditions are encouraging signs for gold bulls.
Even after the recent rebound, gold is down over 20% its record high in January. Despite fears in the Gulf earlier in the year, gold had failed to attract meaningful safe-haven bids, explaining the sustained decline in price.
However, reduced expectations of a US rate hike in September seem to have provided the necessary catalyst for a rebound.
Regular followers would know that our hypothetical positional bid placed at 4100 got filled on 11 June. For more details on the levels and the fundamental/structural story highlighting the case for turning bullish, see “Gold: Downside Could Be Limited,” dated 10 June 2026.
That position is now in the money.
Spot Gold (XAUUSD; Daily):
Last week’s rebound seems to suggest that Scenario 1 seems to be playing out as outlined in “Gold: Long Bid Gets Filled,” released on 24 June 2026. However, to be sure, the path is likely to be fraught with hurdles.
That’s because there is plenty of resistance along the way. Last week’s break above 4202 has cleared the path initially toward the mid-June high of 4382, followed by the upper edge of a declining channel since January (now at 4460), and a few other subsequent resistances.
This implies that it could well turn out to be a “two-steps-forward-one-step-back” kind of recovery. Still, the trajectory is more important than the nature of the path. In an ideal scenario, a straight-line rise in an uptrend is most favourable for bulls.
However, it is not always the case, especially after a long period of weakness.
Spot Gold (XAUUSD; Weekly)
From a longer-term perspective, Gold’s 38.2% retreacement of the 2022-2026 rise is not necessarily the end of the rally. 38-50% declines after a rapid and sizeable rally are perceived to be reasonable, rather than abnormal.
This is one of the reasons for dollar-cost-averaging, apart from the structural fundamental bullish outlook.
What could go wrong? For one, gold fails to capitalize on the breakout and succumbs to selling pressure. This would pose a risk of a retest of the June low of 3942. In such a case, I would be inclined to place another bid below 4000.
Last week’s bullish move raises the odds that any further decline won’t be sustained. However, as always, I could be wrong!
