Fundamental Overview
Gold has been on a steady decline since hitting a new all-time high on the 17th of July. We saw a reversal in many other markets on that day and although the catalyst hasn’t been clear it seems like it’s all been connected to deleveraging from strengthening Yen.
Basically, the squeeze on the carry trades impacted all the other markets. Given the magnitude of the recent appreciation in the Yen and the correlation with many other markets, it looks like this could be the reason indeed.
On the macro side, the US data continues to point to a resilient economy with inflation falling slowly back to target. The market is fully pricing a rate cut in September and December and some chances of a back-to-back cut in November.
The risks for the economy increase the longer the Fed keeps policy restrictive though, so in the big picture it looks like gold has limited downside and lots of upside. On the other hand, we have Trump now looking more and more like a potential winner and his policies are seen as inflationary which could see the Fed eventually going even more slowly on rate cuts.
This might not impact the market substantially in the short term, but it could decrease the buyers’ conviction for a strong rally.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that gold eventually extended the losses into the 2350 level after the fakeout around the 2430 resistance. We are now trading in the middle of the old range between the 2277 support and the 2430 resistance, so there’s not much we can glean from this timeframe and we need to zoom in to see some more details.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a downward trendline defining the current bearish momentum. The sellers will likely keep on leaning on the trendline to position for a drop into new lows with a better risk to reward setup. The buyers, on the other hand, will want to see the price breaking higher to regain some control and pile in for a rally into the 2430 resistance.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more clearly the recent price action and the rejections from the trendline. This will be the key spot for the buyers and sellers as a break above the trendline will likely increase the bullish momentum, while a stronger rejection should see the price dropping back to the 2350 support. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US Job Openings and the US Consumer Confidence reports. Tomorrow, we have the BoJ Policy Decision, the US Employment Cost Index and the FOMC Policy Decision. On Thursday, we get the latest US Jobless Claims figures and the US ISM Manufacturing PMI. Finally, on Friday, we conclude the week with the US NFP report.