Gold has been under pressure recently as the geopolitical risk premium started to fade with the markets now looking past the Israel-Hamas conflict. The Fed speakers recently have also been pretty hawkish which might have contributed to the correction. The US data though, has been showing signs of softening, especially on the labour market side with the NFP report missing expectations across the board and Continuing Claims rising steadily. These should be bullish signs for Gold going forward because it’s likely to bring rate cuts forward.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that Gold couldn’t sustain the breakout above the key 1985 resistance and erased a third of its gains since the outbreak of Israel-Hamas war. The bias is now turning bearish as the price last Friday fell below a strong support and the moving averages crossed to the downside. The buyers will need to sustain the bounce on the 38.2% Fibonacci retracement level and take the price back above the 1950 level to invalidate the bearish setup.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a divergence with the MACD, which is generally a sing of weakening momentum often followed by pullbacks or reversals. In this case, we might see a pullback into the broken support turned resistance where we can also find the confluence with the trendline, the 38.2% Fibonacci retracement level and the red 21 moving average. This is where the sellers are likely to step in with a defined risk above the resistance to position for a drop into the 1890 level.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the bearish setup around the 1950 resistance. The buyers will want to see the price breaking above the resistance to invalidate the bearish setup and position for a rally back into the highs.
Upcoming Events
This week we have some top tier economic releases. We begin tomorrow with the US CPI report which is going to be one of the most important events of the week. On Wednesday, we have the US Retail Sales and PPI data, while on Thursday we conclude with the latest US Jobless Claims figures. Weak data is likely to support Gold, while strong readings should add to the recent selling pressure.
