KEY POINTS:
- Gold remains supported amid the Fed's dovish reaction function
- Short-term direction to be decided by the key US data this week
- Strong data likely to put pressure on gold, weak data to support it
FUNDAMENTAL OVERVIEW
Gold has been supported recently by the more dovish than expected Fed Chair Powell’s tone at the FOMC press conference.
He downplayed the inflation risk and emphasized the labour market weakness, suggesting that there’s more tolerance for higher inflation than for weaker labour market.
This week is all about the US NFP and CPI reports. Right now, the market is pricing 57 bps of easing by the end of 2026.
If we get strong US data, especially on the labour market side, we will likely see a hawkish repricing and a selloff in gold. On the other hand, weak data should support the precious metal further as the market will bring rate cut bets forward.
In the bigger picture, gold should remain in an uptrend as real yields will likely continue to fall amid the Fed’s dovish reaction function. But in the short term, a further hawkish repricing in interest rate expectations should weigh on the market.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that gold continues to push into new highs after breaking above the 4245 level. The natural target should be the all-time high around the 4381 level.
If the price gets there, we can expect the sellers to step in around the all-time high with a defined risk above it to position for a drop back into the 3887 level.
The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into new all-time highs.
GOLD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see that we got a quick retest of the previous highs around the 4256 level on Friday. The buyers stepped in around those levels with a defined risk below the 4245 level to keep pushing into the all-time high.
The sellers, on the other hand, will better off waiting for the price to come into the all-time highs or break below the 4245 level before piling back in with conviction.
GOLD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see that we have the upper bound of the average daily range for today standing right near the all-time highs.
This suggests that it’s unlikely that we will see a sustained breakout today, so if the price rallies into the all-time highs, we can expect the sellers to pile in to position for a drop back into the 4245 level.
At this point though, it would be better to wait for the US NFP report tomorrow as it’s expected to trigger big moves.
UPCOMING CATALYSTS
Tomorrow we have the US NFP report. On Thursday, we get the US CPI data.
