Fundamental Overview
Yesterday, gold spiked to the cycle highs following another soft US CPI report. The market even started to price in the chance of a third rate cut by the end of the year. Real yields fell and gold rallied as a result.
As of now, it looks like gold have limited downside but lots of upside as inflation abates slowly while risks to the growth picture increase the longer the Fed keeps policy restrictive. In the short-term, strong US data might weigh a bit on the market, but in the long-term weak data is likely to trigger bigger upside moves.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that gold extended the rally into the 2430 resistance yesterday following the soft US CPI report. That’s the area where the sellers will be piling in to position for a drop all the way back to the 2277 support. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into new highs.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we now have a nice support zone around the 2390 level where we can find the confluence of the previous swing level, the trendline and the Fibonacci retracement levels.
This is where we can expect the buyers to pile in to position for the continuation of the uptrend and target a break above the resistance. The sellers, on the other hand, will want to see the price breaking below the trendline to increase the bearish bets into the 2277 support next.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor downward counter-trendline defining the current pullback. If the bullish momentum remains strong enough, the buyers will likely pile in on a break to the upside to increase the bullish bets into new highs. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the US PPI and the University of Michigan Consumer Sentiment survey.
