Fundamental Overview
Gold has been on a steady rise recently due to a geopolitical driver coming from the Middle East and a fall in real yields.
Yesterday, we saw a drop after a benign US CPI report which might have been due just to technicals as we were at a key resistance level or a repricing in interest rates expectations.
In fact, the probabilities for a 50 bps cut in September continue to recede and if we keep on getting pretty stable economic data, then the market will likely need to pare back the aggressive rate cuts expectations putting a lid on gold’s gains.
In the big picture, gold should remain supported as we head into the Fed’s easing cycle, but in the short-term the repricing in interest rates due to better data than feared could weigh on the market.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that gold got rejected from the resistance zone around the 2483 level as the sellers stepped in with a defined risk above the resistance to position for a drop all the way back to the 2360 support. The buyers will want to see the price breaking above the resistance to gain more conviction and pile in for a rally into new highs.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price remains confined in a range between the 2360 support and the 2483 resistance. In the big picture, the market participants will likely keep on “playing the range” by buying at support and selling at resistance until we get a breakout. In the more short-term a break below the 2430 level should see the bearish momentum increasing with the sellers piling in more aggressively.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price yesterday broke out of the recent tight range to the downside and rallied back to retest the support now turned resistance. This is where we can expect the sellers to step in with a defined risk above the level to position for a drop into the 2430 level targeting a break below it.
The buyers, on the other hand, will want to see the price rising back above the resistance to regain some control and position for a rally back into the 2483 resistance targeting a breakout. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the US Retail Sales and Jobless Claims figures. Tomorrow, we conclude the week with the University of Michigan Consumer Sentiment survey.