Yesterday, we got another hot US CPI report which pushed rate cuts expectations further out with the market now pricing in less rate cuts than the Fed’s dot plot. The real yields and the US Dollar rallied strongly as a consequence which put downward pressure on Gold. The usual inverse correlation with real yields broke down recently with talks of heavy central bank buying being the possible culprit.
It could have been just simply a momentum trade though, and the CPI report might have been the catalyst that marked the top. In the big picture, Gold should remain supported as we head into the easing cycle, but in the short-term the hawkish repricing in rate cuts expectations should weigh on Gold, especially if rate hikes start to be put on the table at some point.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that Gold have been rallying into new all-time highs with almost no pullbacks along the way. From a risk management perspective, the buyers will have a much better risk to reward setup around the trendline where they will also find the red 21 moving average for confluence. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the next major trendline around the 2100 level.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the latest move higher is diverged with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it could be a signal for a pullback into the trendline where we can also find the 50% Fibonacci retracement level for confluence. The sellers should pile in on a break below the minor trendline to position for a drop into the trendline around the 2267 level. The buyers, on the other hand, will likely step in here with a defined risk below the minor trendline to position for a rally into new highs.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a counter-trendline around the 2352 level marked by the green box. If the price were to break above the counter-trendline, the buyers will regain control and we will likely see a rally into a new all-time high. Conversely, if the price were to break below the cluster of minor trendline around the 2334 level, the sellers should pile in more aggressively and extend the drop into the 2267 level.
Upcoming Events
Today we get the US PPI report and the latest US Jobless Claims figures. Tomorrow, we conclude the week with the University of Michigan Consumer Sentiment survey. Strong data is likely to weigh on Gold, while weak figures should give it a boost.
