Looking ahead to this week, markets will heavily focus on the US August employment report, ISM manufacturing PMI, JOLTS job openings, and ADP private payrolls data. The Federal Reserve is set to release its Beige Book, with several policymakers also scheduled to speak. With only one key inflation report remaining before the September 15-16 policy meeting, this week's data will serve as a direct test of Warsh's cautious stance of "waiting for more information."
Monday saw gold prices plunge sharply as Warsh's debut speech at Jackson Hole last Friday carried significant hawkish weight. However, his firm tone wasn't without justification. The US July PCE inflation ran at 3.7% year-over-year, with core PCE at 3.3%, both clearly above the 2% target. With inflation proving sticky and oil prices continuing to climb, the assumption that "inflation will naturally recede" is facing repeated scrutiny.
Adding to the geopolitical mix, US forces struck two missile launch silos on Iran's Larak Island on Sunday, marking the first military action against Iran since late July. Iran's Revolutionary Guard subsequently fired missiles at US bases in Jordan, with US officials reporting that "nearly all" incoming missiles were intercepted. By traditional playbooks, such developments should be bullish for gold. But the morning price action tells a different story.
Following the established pattern, the market's initial reaction isn't "safe-haven buying" but rather "inflation risks a second surge, and the Fed will remain hesitant to ease." Consequently, gold opened lower. This geopolitical risk can be characterized as "bearish first, bullish later." In the near term, it lifts oil prices and reinforces rate-hike expectations, weighing on gold. Only if the conflict spirals out of control and threatens economic and financial stability will safe-haven demand outweigh interest rate pressure. We haven't reached that point yet.
From a technical perspective, the bearish correction narrative remains intact for gold this week. However, given the sharp recent decline, chasing downside moves isn't advisable. Instead, watching for a moderate technical rebound to test resistance before initiating fresh short positions seems prudent. Early in the week, the key level to watch is the 4450 region. A sustained break above could open the door toward 4490, though staying below 4500 remains critical. If prices unexpectedly surge above that level early in the week, the short-term outlook would need adjustment. On the downside, initial support lies around 4400, followed by 4380, with the primary near-term correction target sitting near 4320-4310.
In summary, the first trading day following such a sharp selloff requires time for digestion, and investors shouldn't rush to place heavy bets. The greatest risk isn't picking the wrong direction, but rather over-allocating while refusing to cut losses. Volatility has clearly intensified, with a single data release capable of swinging gold prices by 50 dollars in either direction. Position sizing now matters ten times more than directional calls. Friday's nonfarm payrolls report represents the true inflection point for the week. Until then, maintaining light positions with quick, short-term trades is the prudent approach.
For today's trading strategy: Gold - Sell 4420-4425, stop loss at 4435, targets at 4380-4350.
Key economic data and events to watch today, Monday, August 31, 2026: G20 Finance Ministers and Central Bank Governors meeting (timing TBD); US Dallas Fed Manufacturing Business Index for August at 22:30.