Core Bearish Arguments
1. Expectations of a hawkish stance at Jackson Hole are the primary driver for the bears.
Signals from Warsh indicating that inflation targets have not yet been met—and that the door for further rate hikes remains open—have caused the market to reprice the risk of rate hikes, providing upward support for the US dollar and Treasury yields. As long as the market continues to price in a “higher-for-longer” interest rate environment, gold will remain under pressure; the scope for any rebound will be severely limited, and any rally is likely to trigger a fresh wave of selling.
2. Massive long-position stop-loss orders have been triggered, and downward momentum has not yet fully exhausted itself.
Following the pullback from the 4696 high and the breach of the 4500 mark, a large volume of medium-term long positions triggered stop-loss exits, creating a vicious cycle of forced long-position liquidation. Although the market is technically oversold in the short term, a bearish trend on the daily chart has only just begun. With a significant number of “trapped” long positions overhead, any rebound will likely attract selling pressure from investors looking to exit their positions, creating immense resistance to further gains.
3. Previous support levels have transformed into strong resistance, creating layers of hurdles for any rebound.
Levels such as 4500, 4550, and 4600—previously key support zones—have completely flipped into strong resistance levels after being breached. For gold prices to reclaim these levels, a major positive catalyst is required—something unlikely to occur before the release of the Non-Farm Payrolls (NFP) data. Should prices rebound into these resistance zones, a surge of bearish selling pressure is expected, making a “spike-and-drop” scenario highly probable.
4. Risk appetite remains cautious ahead of the NFP report; bulls are hesitant to enter the market aggressively to “buy the dip.”
With several trading days remaining before the NFP report, most institutional capital is adopting a “wait-and-see” approach, unwilling to establish heavy long positions ahead of the data release. Lacking the momentum provided by large-scale buying, it is difficult for gold prices to stage a sustained, significant rebound.