Fundamental Overview
In recent days, gold has been making new highs despite the lack of bullish catalysts and the rise in real yields. Nonetheless, we’ve been seeing some quick selloffs at the highs in a potential sign that real yields are starting to bite, and we might be near a bigger pullback. Today, we get the Flash US PMIs and if the data is strong, we might finally see a decent correction lower.
In the bigger picture, gold remains in a bullish trend as real yields will likely continue to fall amid the Fed’s easing cycle. The pullbacks will likely be triggered by a repricing in rate cuts but unless the Fed’s reaction function changes, the uptrend should remain intact.
One key event which could trigger a strong selloff in gold is the upcoming US election. In fact, a Trump victory will likely raise real yields on higher growth and less rate cuts expectations.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that gold managed to rally into a new high this week but eventually gave back everything as the pressure from rising real yields started to build. From a risk management perspective, the buyers will have a better risk to reward setup around the major trendline, while the sellers will want to see the price breaking below the trendline to pile in for a drop into the 2500 level.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price broke below the minor trendline that was defining the bullish momentum on this timeframe. This might be a signal for a pullback. The sellers will likely step in around these levels to position for a drop into the 2685 level, while the buyers will want to see the price rising back above the trendline to target new highs.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor resistance zone now around the 2740 level where the price is retesting the broken trendline. This is where we can expect the sellers to pile in with a defined risk above the resistance to position for a drop into the 2685 level, while the buyers will want to see the price breaking higher to target new highs. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US Jobless Claims and the US Flash PMIs.
