We haven’t seen much action in gold this week as the lack of catalysts kept the market at bay. In fact, the price action remains tentative as we head into the US CPI release next Wednesday. Looking at the bigger picture, the Fed’s preference for a higher for longer stance rather than further tightening is more or less neutral for gold, although given the huge rally since the 2000 level it could lead to a slow correction lower.
For another sustained rally, gold will need the market to price back in more rate cuts, and that should happen only with much weaker US data or downside surprises in the US inflation figures. Conversely, another reacceleration in the data with hot readings all around will likely trigger a faster selloff.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that gold consolidated around the 2300 level as the market priced out almost all the rate cuts and the Fed is unwilling to tighten policy further. We are in a kind of limbo right now, waiting for a catalyst to trigger another sustained move. From a risk management perspective, the buyers will undoubtedly have a much better risk to reward setup around the 2150 level where we can find the confluence of the previous all-time high, the major trendline and the 61.8% Fibonacci retracement level.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a range between the 2280 support and the 2328 resistance. Technically, the market participants can “play the range” by buying at support and selling at resistance but avoid trading in the middle of the range unless there’s a tradable catalyst. The red line around the 2352 level defines the current technical downtrend, so a break above it should turn the trend around and likely lead to a rally into a new all-time high.
Upcoming Catalysts
Today we get the latest US Jobless Claims figures while tomorrow we conclude the week with the University of Michigan consumer sentiment survey. It’s unlikely that we will see major changes to the market’s expectations though, so the next big event to watch will be the US CPI next week.
