On the daily chart below, we can see that after falling for basically the whole February, gold had a nice bounce at the start of March. The pullback brought the price back to the red long period moving average where the sellers started to pile in.
Gold is sensitive to real yields, and these have been rising lately as the market is pricing a more hawkish Fed given that the US data started to come in hot since February onwards.
Yesterday, Fed Chair Powell opened the door for a 50bps hike and a higher terminal rate which caused a selloff in gold as the market is now pricing a higher chance of the more aggressive hike at the March meeting.
The market will now focus on the NFP and CPI report that are coming next and beats in the data should send the price even lower, while misses should give us a strong rally, possibly towards the 1900 level.
On the 4 hour chart below, we can see that the buyers couldn’t sustain the breakout of the 1860 resistance zone and gave up to the sellers resulting in a fakeout. The big selloff you see on the chart was some positioning into Powell’s testimony and then more selling as Powell sounded more hawkish than expected.
The price has overstretched a bit yesterday as depicted by the distance between the price and the blue short period moving average. Generally, we can see some consolidation or a pullback before the next push into the original direction. The most likely area for a pullback would be the resistance zone at 1825.
On the 1 hour chart below, we can see more closely the possible resistance for a pullback. The 1825 area has the red long period moving average and as you can see looking left, this level has been respected by the market several times.
That’s where we will most likely see the sellers piling in again trading into the NFP. In case, the NFP misses expectations, the buyers will have the conviction to break the resistance and probably extend the rally towards the 1860 level.
