FUNDAMENTAL OVERVIEW
Gold broke through a key technical level yesterday and extended the gains into new record highs. We had a weak US Consumer Confidence report that provided support to the market, but the momentum increased when talking to the press Trump suggested that he wasn’t concerned with the decline in the dollar at all.
The narratives underpinning gold continue to be de-dollarisation, geopolitical tensions, and so on. Given the lack of bearish catalysts, the price continues to rise just by inertia. I personally think that this is now more about FOMO rather than something fundamental.
I’m not saying that the long-term trend is over, but the current levels are not justified in the short-term. I think we are at an inflection point and February could be the first major negative month for precious metals if the right conditions fall in place.
Today, the focus will be on the FOMC decision where the central bank is expected to keep everything unchanged. The focus will be on Powell’s press conference during which he could pull out a surprise by announcing that he intends to remain on the board of governors until his term ends in 2028. That could be taken as a strong fight for Fed independence, and we could see some downside in gold in the short-term.
We could also get the new Fed chair announcement. Betting markets now see BlackRock’s Rieder as the favourite. Rieder or Waller could ease Fed independence risks and could weigh on precious metals.
The other major catalyst could be the US NFP report next week. We’ve been seeing improvements in the US Jobless Claims data that seem to suggest a pickup in labour market activity. A strong report would trigger a hawkish repricing in interest rate expectations and put pressure on gold. In case we don’t get the bearish catalysts, gold could keep on rising just by inertia.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see gold broke above the top trendline and extended the gains into new record highs. From a risk management perspective, the buyers will have a better risk to reward setup around the broken trendline to keep pushing into new highs, while the sellers will want to see the price falling back below the trendline to position for a drop into the bottom trendline next.
GOLD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see that we have a minor upward trendline defining the bullish momentum on this timeframe. The buyers will likely continue to lean on the trendline to keep pushing into new highs, while the sellers will look for a break lower to pile in for a drop into the next trendline around the 4800 level.
GOLD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much we can add here as piling in at these levels looks awful from a risk to reward perspective. The buyers should wait for a pullback into the trendline to position for new highs with a defined risk below the trendline. The sellers, on the other hand, will need the price to break below the trendlines to open the door for a correction into the 4800 level. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we have the FOMC policy announcement and a potential new Fed chair pick. Tomorrow, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the US PPI report.
