Gold rebounded in the final part of last week despite higher
than expected US inflation data. The driver, as it’s usually the case for gold,
was the fall in real yields which are a function of nominal yields and
inflation expectations.
In fact, inflation expectations have remained largely
unchanged due to the persistently elevated energy prices and the not so hawkish
Federal Reserve. Nominal yields, on the other hand, dropped following the US
inflation data alongside growth sensitive assets like stocks and copper for
example. That might have been an early signal of growth concerns.
Gold generally does well when there are growth
concerns amid high inflation. The next key catalyst to watch would be the US
Flash PMIs on Friday.
If the data
surprises to the downside, growth concerns might increase and we could see a
dovish repricing further out the curve. This scenario should be bullish for
gold as real yields would fall. A stronger than expected reading, on the other
hand, could quell growth fears and drag the precious metal down again.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that gold(CFD contract) is
consolidating around the downward trendline. We can expect the sellers to step
in here, with a defined risk above the trendline, 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. The sellers might want to
split their short position in case the price probes above the trendline to test
the resistance. The buyers, on the other hand, will need the price to break
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 support zone around the 4,130 level. If we get a pullback from the
trendline or the resistance, we can expect the buyers to step in around the support,
with a defined risk below it, to keep pushing into new highs. The sellers, on
the other hand, will look for a break lower to increase the bearish bets into
the 3,885 level next. The red lines define the average daily range for today.
UPCOMING CATALYSTS
On
Thursday we get the latest US Jobless Claims figures, while on Friday we
conclude the week with the Flash US PMIs.
This article was written by Giuseppe Dellamotta at investinglive.com.