Yesterday, US PPI came in much higher than expected,
but gold’s reaction was similar to what we saw after the US CPI release, that
is the price initially spiked lower before recovering and rallying to new
highs. Treasury yields also fell following the data, pointing to either
overstretched positioning or growing concerns about the economic outlook.
Despite the Core PCE
estimates now showing a monthly increase of 0.34% in October, the rate hike
expectations for October actually fell after the PPI release. What’s more interesting
is that further out the curve, we’ve seen a dovish repricing.
On the geopolitical
front, we haven’t seen any change. The Saudi Arabia–Houthi conflict continues,
while US–Iran negotiations remain at a stalemate. Meanwhile, oil prices
continue to rise amid the ongoing Middle East crisis.
Looking ahead, we have the Flash PMIs, the FOMC, the US-Iran
negotiations and the US midterm elections as key catalysts. If the economic
data starts pointing to deteriorating economic conditions, then we could see
the market starting to price in an economic slowdown, which could initially
support gold.
If the data continues to support strong economic momentum, though, then
we could see the precious metal coming back under pressure, unless the Fed continues
to stay more dovish than market’s expectations, as that would lower real yields
and support gold.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that gold(CFD contract) is finally
approaching the downward trendline. The sellers will likely lean on the
trendline, with a defined risk above it, to position for a drop into the 3,885
level. The buyers, on the other hand, will want to see the price breaking
higher to pile in for a rally into the 4,700 level next, with the 4,500 level
as the first target.
GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME
On the 4 hour chart, we have
a strong resistance zone around the 4,228 level. If the price probes above the
trendline, the resistance will likely be the last line of defence for the
sellers. From a risk management perspective, the sellers will likely step in
around the trendline and the resistance, with a defined risk above the
resistance, to position for new lows. The buyers, on the other hand, will want
to see the price breaking above the resistance to open the door for new highs
and target the 4,400 level next.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, we
have a minor upward trendline defining the bullish momentum. The buyers will likely
continue to lean on the trendline, with a defined risk below it, to keep pushing
into new highs and target a break above the resistance. The sellers, on the
other hand, will look for a break lower to increase the bearish bets into new
lows, targeting the 3,885 level next. The red lines define the average daily range for today.
This article was written by Giuseppe Dellamotta at investinglive.com.