Are international gold bulls on shaky ground? Is the collapse of the US dollar against the Japanese yen just an appetizer?

Today, Tuesday (September 8), during the Asian session, after nonfarm payrolls delivered a “triple slap in the face,” the gold market held firm and rebounded instead of collapsing! Spot gold is quoted at $4,429.94/oz, up 0.55%, with a high and low of 4,442.87/4,405.55, as the $4,400 level has been defended three times. August nonfarm payrolls increased by 162,000, unemployment is at 4.1%, and the probability of a rate hike in September sits at about 60%. US Treasury yields and the US dollar are putting pressure on the market, while Middle Eastern oil prices are pushing inflation higher and reinforcing tightening measures. In the short term, watch for resistance at 4,440–4,465, strong support at 4,350, and avoid chasing breakouts before the release of the PPI/CPI data.

[News Flash]

While spot gold is repeatedly struggling around the $4,400 level and the bulls are barely holding their lines, few have noticed that the USD/JPY exchange rate has plunged 400 points in a single week—this is actually a warning bell for the precious metals market: this correction may have only just begun.

First, look at the wild moves in USD/JPY: last week, a single comment from hawkish Bank of Japan member Takata Hajime—“consecutive rate hikes are possible”—ignited the market, sending USD/JPY crashing from 160 to near 153, marking the largest single-week drop in months. The market has now priced in a 97% probability of a Bank of Japan rate hike in September. But, strangely, the dollar’s weakness has not fueled gold’s rise; instead, gold prices have come under pressure—because what is weighing on gold is no longer the dollar, but expectations of a Federal Reserve rate hike.

The defensive line for gold bulls is now on shaky ground: after the nonfarm payroll blowout, the probability of a Fed rate hike in September surged from 50% to 60%. The $4,400 level has already been tested twice, each time just barely supported by central bank gold buying. But the bulls are almost out of ammunition: CFTC data show net long positions in COMEX gold have dropped by over 10,000 contracts, and only the SPDR Gold ETF is left passively taking the other side. This “speculators exiting, funds stubbornly holding” pattern cannot last long. If this week’s US CPI data comes in above expectations and rate hike fears are confirmed, the $4,400 defense will most likely give way. Then, the 100-day moving average at $4,365—or even the ultimate support at $4,300—would be tested.

Meanwhile, the correction in USD/JPY is far from over: JPMorgan warns there are still Y16–17 trillion in short yen positions left uncleared. Should the Bank of Japan actually hike rates next week, a short squeeze could smash USD/JPY down into the 142–146 range. Both markets are waiting for this week’s CPI data to “decide their fate”: if inflation cools, Fed rate hike expectations will collapse, gold will rebound, and USD/JPY will stabilize; but if inflation remains hot, a scenario of gold breaking down and further carnage in USD/JPY may only just be beginning.

[Latest Spot Gold Technical Analysis]

From a technical analysis perspective: currently, all major timeframes are showing choppy market action. Weekly, daily, and 4-hour charts all display narrowing Bollinger Bands and converging moving averages, with no clear signs of a big rally or sharp drop.

Furthermore, daily candlesticks have continued to shrink, with smaller and smaller real bodies, essentially confirming that before this week’s CPI data is released, volatility in the market will likely remain limited.

One more detail worth noting—in the H4 timeframe, the lows are rising: Friday’s low was 4,365, Monday’s was 4,380. It’s obvious that the downside momentum is weakening. Following this pattern, Tuesday’s low could also move up. Watch for support near 4,400; if you favor going long on dips, today could see further upside, with resistance at 4,450 and the 4,500 high.