Fundamental Overview
In recent days, gold has been making new highs despite the lack of bullish catalysts. Moreover, the latest leg higher diverged with real yields which climbed to new highs since last week.
This divergence could point to a pullback in gold ahead of the Flash US PMIs on Thursday, and if we get strong data, it might even trigger a quick correction lower.
In the bigger picture, gold remains in a bullish trend as real yields will likely continue to fall amid the Fed’s easing cycle. The pullbacks will likely be triggered by a repricing in rate cuts but unless the Fed’s reaction function changes, the uptrend should remain intact.
One key event which could trigger a strong selloff in gold is the upcoming US election. In fact, a Trump victory will likely raise real yields on higher growth and less rate cuts expectations.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that gold managed to rally into new highs despite the lack of bullish catalysts and the rise in real yields. This might be a signal for the buyers to be cautious here. From a risk management perspective, the buyers will have a better risk to reward setup around the major trendline. The sellers, on the other hand, will want to see the price breaking below the trendline to pile in for a drop into the 2500 level.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have another minor upward trendline defining the current bullish momentum. The buyers will likely keep on leaning on it to target new highs, while the sellers will look for a break lower to target a drop into the previous all-time high at 2685.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that yesterday we got a quick drop lower although it wasn’t triggered by any catalyst other than some pressure coming from the rise in Treasury yields. The market eventually erased the drop, and the price is now back around the all-time highs.
Although we might see new highs, the risk of chasing the upside at the moment is too high. The red lines define the average daily range for today.
Upcoming Catalysts
This week is pretty empty on the data front with market moving releases scheduled for the latter part of the week. On Thursday, we get the Flash US PMIs and the US Jobless Claims figures.