FUNDAMENTAL
OVERVIEW
Gold rallied on
Friday despite a higher-than-expected monthly core inflation reading. It was a strange
reaction, as the data boosted expectations for a Fed rate hike, with traders
now pricing in an 87% chance of an increase on Wednesday.
Moreover, the
hawkish repricing triggered by surging oil prices pushed real yields higher,
which is generally negative for gold. Nonetheless, the precious metal has
remained relatively resilient above the major $4,300 support zone.
Looking ahead, the
focus will be on Wednesday’s FOMC decision, with the Fed expected to hike rates
by 25 bps. This would be the first hike since 2023. Traders will be attentive
to any hawkish surprises, as these could send gold lower on further tightening
of financial conditions.
The other major
focus will be developments in the Middle East, as oil prices continue to rise
and fuel inflation concerns amid worsening disruptions and supply fears. Oil
prices have been the key driver of markets recently, so any de-escalation in
the Middle East could push oil prices lower and lead to a repricing of
aggressive rate hike expectations, which would support gold.
For now, I think
the fundamentals point to further downside for gold as we would need a
de-escalation in the Middle East or a dovish Fed to change the picture.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see gold is trading again at the 4,311 support. We can expect the buyers to
step in here with a defined risk below the support to position for a rally into
the 4,890 level. The sellers, on the other hand, will want to see the price
breaking lower to pile in for a drop into the 3,885 level next.
GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME
On the 4 hour chart, we
have a downward trendline defining the bearish structure. If we get a pullback
into the trendline, we can expect the sellers to lean on it with a defined risk
above it to keep pushing into new lows. The buyers, on the other hand, will
look for a break higher to increase the bullish bets into the 4,890 level next.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add as the buyers will want to pile in around the support to
target new highs, while the sellers will want to see the price breaking lower
to gain more conviction for more downside. The red lines define the average daily range for today.
UPCOMING CATALYSTS
On Wednesday, we have the
FOMC rate decision. On Thursday, we get the US Jobless Claims figures. Traders
will also keep a close eye on developments in the Middle East.
This article was written by Giuseppe Dellamotta at investinglive.com.