Gold Is Losing Upside Momentum

Gold prices have been on a steady climb this week, rising by 1.0% to $2,455 per troy ounce. The gradual increase, with prices inching closer to an all-time high, indicates a persistent attempt to break through resistance levels. However, the diminishing size of each upward movement suggests that the market might be reaching a point of exhaustion.

Large investors seem to share this sentiment. The SPDR Gold Trust (GLD) has reported net inflows for six consecutive weeks, but the inflow amounts have been decreasing, reflecting a cautious optimism. Despite the inflows totaling $1.38 billion during this period, gold prices have only increased by 3.5-4.0%, leading to a modest net profit of around 3.0% after accounting for fees. This lackluster return might not be enough to satisfy large investors, indicating potential weakness in the gold market.

Recent economic data has provided mixed signals for gold. The U.S. labor market report, which was weaker than expected, did not significantly boost gold prices. Similarly, this week's favorable inflation data, with both Producer and Consumer Price Indexes declining, failed to propel gold past the $2,470-$2,500 resistance range. Instead, prices retreated by 1.5% to $2,438 per ounce, suggesting that the market might be tiring of the current range-bound trading.

Technically, gold has a window until early September to make a decisive move above the current resistance. However, if it fails to break through by the end of August, investor disappointment could lead to a sharp decline in prices. The Federal Reserve's upcoming FOMC Minutes and the Jackson Hole Economic Symposium next week will be crucial. If the Fed signals a dovish shift in monetary policy, it could provide the final push for gold to break through its "glass ceiling." Failure to capitalize on this opportunity, however, could result in a significant downward correction.