On the daily chart below, we can see the big rally in gold since the last Thursday. Everything started with jobless claims where we saw the first miss after several months of strong beats and the treasury yields fell as the market started to look at a possible turn in the jobs market.
On Friday, the NFP report showed a higher-than-expected unemployment rate and lower than expected wage gains. This caused an extension of the selloff in yields that intensified as the Silicon Valley Bank failed. The market started to fear another banking crisis and we saw risk aversion across the board.
On Monday, the risk sentiment remained on the backfoot and the market repriced lower future interest rates expectations with rate cuts by the end of the year and at some point even no hike at the March FOMC meeting. All these events decreased real yields and gave gold the tailwind to rally. The moving averages have now crossed to the upside in a sign that we may be in front of another rally that could extend beyond the 2000 level.
On the 4 hour chart below, we can see that the price is now pulling back from stretched longs. The best level for the buyers would be the support at 1864 with the 50% Fibonacci retracement level. One reason for the bigger pullback may be that the US CPI report yesterday showed that inflation is still too high in US and the Fed may be forced to keep hiking even if there are stresses elsewhere.
On the 1 hour chart below, we can see that we may have a bullish flag pattern if the price manages to break the upper band of the channel. Buyers will want to wait for the breakout to start piling in and push the price to new higher highs. Sellers may want to lean on the 1902 level to position short targeting the 1864 support. That will be the last line of defence for the buyers.
