FUNDAMENTAL
OVERVIEW
Gold erased completely the Treasury buyback announcement gains after Fed
Chair Warsh retightened financial conditions with his hawkish speech at the
Jackson Hole Symposium. Since yesterday, we’ve started to see pullbacks across many
markets as the hawkish repricing run its course and things stabilised.
The US CPI report next Friday remains the key risk event that could influence
interest rate expectations and decide the next direction for gold. As of now,
traders are seeing a 58% chance of a rate hike in September.
I think only a soft CPI could bring the probabilities
below 50% and deter the Fed from hiking at the upcoming meeting. If the
probabilities stay at or above 50%, the Fed might be forced to hike regardless
because failure to do so would send a dovish message.
For gold, I think the upside is currently limited by Fed tightening risks
and the escalation in the US-Iran war. These two drivers will be monitored
closely.
A de-escalation in the Middle East and dovish repricing in interest rate
expectations via a soft CPI would be positive drivers and should take gold to
new highs. Conversely, a hot CPI without a de-escalation in the war, should
trigger another selloff which might take gold below the 4,000 level again.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that gold eventually dropped to the key swing low around the 4,311 level where
the price bounced as the buyers stepped in to position for a rally into the
4,890 level. The sellers will need the price to break below the 4,311 level to
open the door for a move into the 3,885 level next.
GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME
On the 4 hour chart, we can
see the price is now near the key resistance zone around the 4,450 level. This
is where we can expect the sellers to step in with a defined risk above the
resistance to position for a drop back into the 4,311 level. The buyers, on the
other hand, will want to see the price breaking higher to increase the bullish
bets into the downward trendline next.
GOLD
TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can
see the price is trading inside a tight channel which might also signal weakening
bullish momentum. The buyers will likely continue to lean on the lower bound of
the channel to keep pushing into new highs, while the sellers will look for a
break to pile in for a drop back into the 4,311 support. The red lines define
the average daily range for today.
UPCOMING CATALYSTS
Todaywe have Fed’s Waller speaking, the
US Jobless Claims data and the US ISM Services PMI. Tomorrow, we conclude the
week with the US NFP report.
This article was written by Giuseppe Dellamotta at investinglive.com.