Fundamental Overview
Gold saw a quick drop today during the Asian session with the news of Scott Bessent nomination for Treasury secretary as the most likely culprit. Bessent is a fiscal hawk, and the market views him as a great pick for the job.
In fact, one of the main reasons why the magnitude of the correlation between gold and real yields weakened in the past couple of years was due to the US fiscal profligacy. This has led to much stronger rallies in gold when real yields fell and more contained selloffs when real yields rose.
In the bigger picture, gold remains in a bullish trend as real yields will likely continue to fall amid the Fed’s easing cycle, but the short-term corrections will be triggered by a repricing in rate cuts expectations.
Overall, we might not see the same strong uptrend in gold going forward as we got used to in the past couple of years.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that gold managed to rally into the 2720 level almost erasing completely the Trump-led selloff. Today, we saw a quick drop during the Asian session on positive US fiscal outlook. There’s not much else we can glean from this timeframe, so 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 nice support zone around the 2643 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. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into new lows.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more clearly the recent price action with the quick drop overnight. The price is now consolidating around the lower bound of the average daily range, so there might not be much left on the downside for today.
Upcoming Catalysts
Tomorrow we have the US Consumer Confidence report and the FOMC Meeting Minutes. On Wednesday, we get the US PCE report and the latest US Jobless Claims figures.
