FUNDAMENTAL
OVERVIEW
Gold has been
under pressure to start the week as the elevated oil prices and the FOMC
decision kept traders on the defensive. As a reminder, on Friday, we got a higher-than-expected
US monthly core inflation reading that sealed the September Fed rate hike. The
market is currently pricing in a 92% chance of an increase tomorrow.
With a rate hike
already priced in, traders will focus on the dot plot and the Fed’s communication.
The expectations are for the Fed to signal another rate hike by the end of the
year and possibly another one in 2027. Very few expect three or more hikes.
If the Fed signals
three or more, that would likely be taken as a hawkish surprise and trigger a
selloff in gold. Conversely, a forecast suggesting just one more rate hike
could be taken as dovish and could give gold a boost. The press conference
is not expected to give away much given Warsh’s preference for limited forward guidance.
The other major
focus will be developments in the Middle East, as oil prices continue to trade
above $100 level 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 dovish
repricing, which could ultimately 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 probed below the key 4,300 support but the bearish momentum hasn’t
increased. The buyers will want to see the price rising back above the support
zone to pile in for a rally into the 4,890 level. The sellers, on the other
hand, will continue to step in around the support with a defined risk above it
to keep pushing 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 position for a drop into the 3,885 level. 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, we
have a consolidation between the 4,250 and 4,320 levels. The buyers will want
to see the price breaking higher to pile in for a pullback into the trendline,
while the sellers will look for a break lower to extend the drop into new lows.
The red lines define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow, 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.