Despite the surging real yields and US Dollar in the past few months, Gold continued to show remarkable resilience decoupling from the usual correlations. This week though, Gold capitulated, and has been falling everyday with stronger and stronger intensity. The last week’s FOMC meeting might have been a wakeup call for the market as the Fed made it clear that they won’t ease their monetary policy as fast as the market expects. The problem for Gold bulls now is that it’s been diverging with real yields and the greenback for a long time and if it starts to catch up with the usual correlation, we might see much lower prices next.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that since the fakeout on the 1934 resistance, Gold started to fall with almost no pullback and has even broken below the low yesterday. This break opened the door for a fall into the 1800 level which would erase all the gains seen after the collapse of the Silicon Valley Bank back in March.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the sellers will be better off if the price pulled back all the way up to the trendline where there’s also the confluence with the previous low, the 38.2% Fibonacci retracement level and the red 21 moving average. The price is indeed a bit overstretched to the downside at the moment, but such a big correction might happen only with some negative economic data that makes the real yields and the greenback to pull back as well.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have another minor trendline which might have higher chances of working out if this strong bearish momentum is to continue. In fact, we can expect the sellers to lean on the trendline and the red 21 moving average with a defined risk above the trendline to position for more downside. The buyers, on the other hand, will want to see the price breaking above the minor trendline to position for a rally into the major trendline.
Upcoming Events
Today the main event will be the US Jobless Claims report. Strong data is likely to keep weighing on Gold as that should keep real yields and the US Dollar supported. On the other hand, weak readings should provide some relief for Gold and lead to a correction. Tomorrow, we will see the latest US PCE data which is unlikely to change much in terms of market pricing unless we see some big surprises.
See also the video below
