KEY POINTS:
- Gold rallied overnight on geopolitical news
- US NFP report on Friday a key risk event
- Big picture trend remains skewed to the upside
- Trendline around the 4230 level could act as strong support
FUNDAMENTAL OVERVIEW
Gold has been supported recently by the soft US NFP and CPI reports before the Christmas holidays. That helped to push the precious metals into new all-time highs before a quick selloff brought prices back to the original levels.
Today, gold saw some upside overnight on geopolitical news . In fact, the US President Trump escalated rhetoric across Latin America, reinforcing Washington’s assertion of control over post-Maduro Venezuela while openly signalling that Colombia and Mexico could also face US action as part of a widening campaign against criminal networks and regional instability.
This week we have the December NFP report coming up, and while the previous report might have been taken with a pinch of salt due to shutdown related issues, this one should give us a clearer picture. Strong data might lead to a correction, while soft figures should keep on supporting the upside.
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 hawkish repricing in interest rate expectations could weigh on the market.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that gold pushed into a new all-time high during the Christmas week but eventually erased all the gains. From a risk management perspective, the buyers will have a better risk to reward setup around the trendline to position for a rally into a new all-time high. The sellers, on the other hand, will want to see the price breaking lower to pile in for a drop into the 3887 level next.
GOLD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see that we have a minor resistance zone around the 4440 level. This is where we can expect the sellers to step in with a defined risk above the resistance to position for a drop into the major trendline. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new all-time highs.
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 around the resistance. This suggests that it’s unlikely that we will see a sustained breakout today, so there’s a good chance that we either consolidate here or pull back into the minor trendline.
We will likely find dip-buyers around the minor trendline targeting a break above the resistance, while the sellers will look for a break below the trendline to increase the bearish bets into the major trendline.
UPCOMING CATALYSTS
Today we get the US ISM Manufacturing PMI. On Wednesday, we have the US ADP, the US ISM Services PMI and the US Job Openings data. On Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the US NFP report.
