Gold continues to be supported by the negative risk sentiment caused by the Israel-Hamas war. We’ve been seeing a clear pattern of strong rallies into the weekend in the past three weeks as market participants feared a ground offensive in Gaza and an escalation of the conflict. Last week, the Israeli PM Netanyahu confirmed that they were indeed preparing for a ground invasion and late on Friday we got some early reports of the Israeli military entering Gaza.
This has led to another rally into the weekend. Over the weekend, we got reports that a ground offensive was indeed underway but as of now we haven’t got any escalation of the conflict as it remains confined to the Levant. This might lead to a “buy the rumour, sell the fact” reaction today and the technical levels will help with the positioning into the next trades.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that Gold last Friday broke above the key 1985 resistance as the market wanted to position on a more defensive side going into the weekend. The break above the resistance opened the door for a rally into the all-time high around the 2075 level and we are also approaching a positive seasonal period for Gold.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the latest leg higher is diverging with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we might see a pullback into the minor trendline and the red 21 moving average where we can expect the buyers to step in with a defined risk below the trendline to position for another rally into new highs. The sellers, on the other hand, will want to see the price breaking below the trendline to confirm the reversal and pile in to target the 1950 support.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the bullish setup with the 61.8% Fibonacci retracement level adding an extra layer of confluence. This will be a key spot for market participants as a bounce is likely to lead to a rally, while a breakout should trigger a selloff into the 1950 support where we will find the buyers again positioning for another rally with an even better risk to reward setup.
Upcoming Events
This week, we will get lots of tier one data points with the US labour market and the FOMC decision in focus. Tomorrow, we have the US Employment Cost Index and the Consumer Confidence report. On Wednesday, it will be the time for the US ADP, the ISM Manufacturing PMI and the FOMC rate decision. On Thursday we will get the US Jobless Claims data, while on Friday we conclude the week with the US NFP report and the ISM Services PMI. Strong data or a more hawkish than expected Fed are likely to weigh on Gold, while weak reports should continue to support the yellow metal.
See the video below
