Ignore Technical Noise and Focus on Algorithmic Guidance

Summary:

Waller’s attempt to “outsource” part of the tightening function could lead the market to price in the risk that the Fed may act too late.

BUY XAUUSD

EXP

PENDING

4059.00

Entry Price

4398.00

3910.00

4112.56 +45.21 +1.11%

Pips

PENDING

3910.00

Exit Price

4059.00

Entry Price

4398.00

Fundamental

Gold staged a sharp rebound on Thursday after the Federal Reserve kept interest rates unchanged. However, the Fed’s continued commitment to a restrictive policy stance has kept gold prices under pressure below the $4,100 level.

The Fed left rates unchanged at its July meeting, but internal hawkish pressure intensified, with three voting members supporting a 25-basis-point rate hike. We believe the most significant shift from this meeting was not the rate decision itself, but rather Waller’s attempt to reduce direct policy intervention and rely more on market-driven increases in interest rates to tighten financial conditions — effectively “outsourcing” part of the tightening process to the market.

However, with inflation still remaining above the Fed’s target, this approach could weaken market confidence in the credibility of the Fed’s policy framework. Following the meeting, long-term U.S. Treasury yields surged, causing a notable steepening of the yield curve, which may indicate that investors are beginning to price in higher long-term inflation risks and greater policy uncertainty.

Looking ahead, we believe that if employment or inflation data comes in stronger than expected, the market may not only further increase expectations for a September rate hike, but also begin pricing in the risk that the Fed has fallen “behind the curve.”

A further rise in long-term yields would place additional pressure on risk assets and increase the likelihood of broader market adjustments.

Ignore Technical Noise and Focus on Algorithmic Guidance_1

Technical Analysis

Gold’s sharp move higher followed by a pullback after the Fed’s rate decision was in line with expectations. In fact, the current price action closely aligns with the core logic of quantitative trading and algorithmic models across multiple timeframes.

From an algorithmic perspective, a genuine trend reversal requires structural confirmation within a specific timeframe.

Timeframe Misalignment:If extreme one-way movements occur on the daily or even four-hour charts, but the monthly timeframe has not yet formed a meaningful closing structure, algorithmic models — especially medium- and long-term CTA trend-following systems and macro quantitative models — will generally classify such moves as “noise fluctuations” or “high-volatility tests” rather than genuine trend reversal signals.

Closing Price Is the Ultimate Reference:When algorithms evaluate signals on larger timeframes, especially the monthly chart, the primary focus is the closing price.

Before the monthly candle closes on the final trading day (such as July 31), all sharp intraday rallies or declines on lower timeframes are effectively only contributing to the upper or lower wicks of the monthly candle.

Our view is that before the monthly close, any sharp move in either direction that attempts to establish a trend continuation could disrupt the broader monthly signal.

In other words, if the monthly candle needs to close as a doji or a moderately bullish candle with a relatively short upper wick, this would provide the structural foundation for a stronger upside reversal in the following month. The same logic applies to a bearish monthly setup.

Otherwise, any clear directional move that significantly deviates from the higher timeframe structure may not be sustainable from an algorithmic perspective. Such price deviations are likely to be corrected, with gold eventually returning toward its fair value implied by the monthly closing structure.

Trading Strategy

Direction: Buy

Entry: 4059

Target: 4398

Stop Loss: 3910

Strategy Valid Until: August 29, 2026, 23:55

Support Levels:3982, 3959, 3900

Resistance Levels:4055, 4074, 4116

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