Last Friday, Gold extended the rally into new highs as the US NFP report, despite beating on the headline number, showed again some weakness under the hood. In fact, the unemployment rate jumped to the highest level in two years and the household survey showed job losses for the third consecutive month. Moreover, the average hourly earnings, which are particularly important for inflation, were much lower than expected. Overall, Gold should remain supported as we head into the easing cycle and strong US data should offer dip-buying opportunities as long as the market doesn’t start to fear a new inflationary wave that forces the Fed to hike rates.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that Gold continues to make new highs with no pullbacks along the way. We can notice though that the price is a bit overstretched as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the buyers will have much better risk to reward setup around the previous all-time high at 2142 where we can also find the confluence of the 38.2% Fibonacci retracement level and the daily 8 moving average. This is where we can expect the buyers to step in with a defined risk below the Fibonacci level to position for a rally into new highs. The sellers, on the other hand, will want to see the price breaking below the Fibonacci level to pile in and target a drop into the 2080 support.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price has been diverging with the MACD for some time. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it should signal at least a pullback into either the minor black trendline or the 2142 level. The buyers might want to split their orders in half as the price can bounce from either level. Remember that we also have the US CPI report tomorrow which will move the market a lot. If we get a spike lower, the buyers will likely take it as an opportunity to fade the move and finally join the uptrend at better levels.
Upcoming Events
Tomorrow we have the main event of the week, that is the US CPI report. On Thursday we get the US PPI, the US Retail Sales and the US Jobless Claims figures. On Friday, we conclude the week with the University of Michigan Consumer Sentiment survey. Strong data is likely to weigh on Gold in the short term, while weak figures should give it a boost.
