Gold has kept hold of last week’s advance after July consumer inflation came in line with expectations, softening the case for a Federal Reserve rate rise next month. Today’s producer price report lands after this article goes out, and it is the next test of that view.

The 4-hour chart

Gold pulling back into the previous range highs on the 4-hour chart, with RSI trending lower while price held its uptrend.[/caption]

Gold has travelled a long way since our previous coverage of gold’s breakout, and the 4-hour chart now shows that move losing momentum. The RSI has been trending lower while price has continued higher, a divergence that tends to appear when a trend is tiring rather than turning outright.

Price is currently testing the local support zone formed by the previous range highs. If that zone holds, a new range could potentially develop between the two orange levels marked on the chart, with the lower one acting as the floor. A break below the current support could potentially take price down toward the 4,340 area.

The 1-hour chart

The bounce from 4,370 on the 1-hour chart, with 4,400 the next resistance overhead.[/caption]

Zooming in, price has bounced from the 4,370 level and there is some bullish momentum building here. The next immediate resistance to the upside sits at 4,400.

A failure to hold 4,370 as support could potentially open a move down toward 4,340, and then 4,300 below that. These are likely to be the most important levels to watch through the rest of the session.

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