The strong US data last week and the continued disinflation as seen in yesterday’s CPI report, keep on weighing on Gold as US real yields remain high and there’s also a risk that the Fed might even do more if the labour market doesn’t soften enough, and inflation gets stuck at high levels. As long as the current big picture remains the same, Gold is likely to continue to range with uptrends and downtrends on lower timeframes.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that Gold broke below the red 21 moving average and extended the fall into new lower lows. The moving averages are about to crossover again, but we are in a rangebound environment, so they are less reliable for trends. As long as picture remains the same, we should see the price falling back into the 1893 support.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we might have a nice bearish setup. In fact, we have a strong resistance zone around the 1915 level where we have the confluence of the trendline, the red 21 moving average and the previous support turned resistance. This is where the sellers should pile in with a defined risk above the trendline and target the 1893 support. The buyers, on the other hand, will want to see the price breaking to the upside to invalidate the bearish setup and position for a rally into the 1934 resistance.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a pretty strong divergence with the MACD at the lows and this is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it might be the confirmation that we are indeed about to see a pullback into the trendline which would give the sellers a better risk to reward setup. If the price continues lower, the sellers might want to pile in anyway but the risk to reward would be worse.
Upcoming Events
Today is likely to be a volatile one given that we are going to see lots of top tier economic indicators released at the same time. In order of importance, we will get the US Jobless Claims, Retail Sales and PPI data. The September FOMC meeting is already a done deal as the market is pricing a 97% probability of a pause, so the data is going to influence the November and December expectations. Strong readings are likely to weigh on Gold, while weak figures should support the yellow metal. Tomorrow, we conclude the week with the University of Michigan Consumer Sentiment report.