Fundamental Overview
Gold continues to rise amid lots of bullish drivers. We recently had a dovish Fed decision where Fed Chair Powell hinted to a September rate cut and didn’t even close the door for “several” rate cuts before the end of the year. Last Friday, we got an ugly US NFP report as the unemployment jumped to a totally unexpected 4.3% rate.
Since then, we saw risk off flows across the board with bonds rallying and the stock market falling. The market is now pricing in 125 bps of easing by year-end which translates into a 50 bps cut in both September and November and a 25 bps cut in December.
Real yields are falling, which is a good thing for gold, but in extreme cases when inflation expectations fall faster than nominal yields, real yields can rise and hurt gold. This is something that happened in the last two recessions. A stock market crash could trigger such an event.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that gold is consolidating around the key 2430 resistance. The buyers are piling in to position for a new all-time high, while the sellers are looking for a break lower to position for a drop back into the 2277 support.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price tested several times the upward trendline as the buyers continue to lean on it to position for new highs. The sellers will want to see the price breaking below the trendline to gain more control and extend the drop into new lows.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more clearly the consolidation around the 2340 resistance. There’s not much we can glean from this timeframe as the buyers will just want the price to stay above the trendline to keep targeting new highs, while the sellers will look for a break lower to increase the bearish momentum. The red lines define the average daily range for today.
Upcoming Catalysts
This week is basically empty on the data front. Today we have the US ISM Services PMI and on Thursday we get the latest US Jobless Claims figures. The market will also pay close attention to Fed members’ comments given the latest developments.