Fundamental Overview
Gold had a really bad Friday last week as it suffered one of its worst days in several months. The reason for the selloff was due to two strong catalysts. The first one hit in the European session when we got the headline that China halted its reserve buying.
This has been the prevailing market narrative for the strong gains in the past months, so it weighed on the price as market participants retrenched.
Then, in the US session, we got a strong NFP report that saw the market repricing once again interest rates expectations on the more hawkish side and real yields spiked to the upside taking gold downward with them.
The sentiment in the gold market is now a bit soft, so we will need a catalyst to give the buyers more confidence to keep charging higher. This catalyst will likely come on Wednesday when we will get the US CPI and the FOMC decision.
A hot US CPI report will likely trigger another selloff and take us to new lows, while cold figures should give the market a boost.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that gold sold off into the strong support around the 2277 level where we can also find the 38.2% Fibonacci retracement level for confluence. This is where we can expect the buyers to step in with a defined risk below the support to position for a rally into a new all-time high with a much better risk to reward setup.
The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the major trendline around the 2150 level where we can also find the 61.8% Fibonacci retracement level for confluence.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the sellers will be better off waiting for a pullback into the recent support-turned resistance around the 2320 level where they will also find the 38.2% Fibonacci retracement level for confluence.
The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and increase the bullish bets into the all-time high.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see the two catalysts that sent gold lower on Friday. There’s not much to do here as the price trades right in the middle of the two key zone. The red lines show the average daily range for today, so in case the price reaches one of the two zone, the market participants will have defined levels where to protect their stops.
Upcoming Catalysts
This week is a bit empty on the data front although we will have the biggest market moving events on Wednesday when we get the US CPI data and the FOMC rate decision. On Thursday, we have the US PPI and the latest US Jobless Claims figures. On Friday, we conclude the week with the University of Michigan Consumer Sentiment survey.
