Fundamental Overview
After the big selloff, gold got stuck in a consolidation since last Tuesday despite a more hawkish than expected Fed Chair Powell. It might be a sign of a short-term bottom, but it could also be just some exhaustion after the 11% drawdown.
There are no strong reasons for more upside at the moment, so the consolidation could extend for weeks or even months if we don’t get new catalysts to trigger a sustained move on either side. Right now, the picture is more neutral/bearish.
Strong US data, especially on the labour market side, should keep weighing on gold as it would keep the market speculating on rate cuts pause. Conversely, weak data is likely to support the precious metal as it would give the Fed more reasons to keep cutting rates.
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 keep weighing on the market.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that gold has been consolidating between the 4000 and 3900 level. There’s not much we can glean from this timeframe, so we need to zoom in to see some more details.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a strong resistance zone around the 4000 level where the price got rejected from several times in the past week. That’s where we can expect the sellers to step in with a defined risk above the resistance to position for a drop into the 3820 level next. The buyers, on the other hand, will want to see the price breaking higher to pile in for a rally back into the 4150 level.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here as the sellers will look to short from the resistance, while the buyers will target a breakout. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US ADP report and the US ISM Services PMI. On Friday, we conclude the week with the US University of Michigan Consumer Sentiment report.
