FUNDAMENTAL
OVERVIEW
Gold briefly spiked below the 4,110 support yesterday, although there
was no clear catalyst behind the move. It may have simply been a case of stops
being triggered after the price pierced the support level. Nevertheless, the
losses were quickly erased, and gold is now trading back above 4,110.
The bias remains neutral to bearish given the lack of any meaningful
improvement in the fundamental picture. Gold could come under renewed pressure
in the coming days as oil prices have been steadily rising following reports
from The Atlantic that the White House asked the Pentagon to develop military
options for strikes against Iranian targets, potentially before the midterm
elections.
Moreover, the Pentagon has reportedly instructed the US Central Command
(CENTCOM) to complete preparations for potentially resuming major combat
operations, according to Axios.
No final decision has been made yet, but the renewed escalation risks
are supporting the oil market again. If this continues, Treasury yields could
extend their gains while rate hike expectations strengthen further.
If the situation does not de-escalate soon, we could see another flush
lower in gold. However, if the Fed continues to sound more dovish than markets,
real yields could decline and provide a floor under gold prices.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that gold(CFD contract) is still
consolidating near the lows. If we get a pullback into the major downward
trendline, we can expect the sellers to 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 4,400 level as the first target.
GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME
On the 4 hour chart, we can
see that yesterday the price probed below the weekly low but eventually erased
all the losses. From a risk management perspective, the sellers will have a
better risk to reward setup around the trendline to keep targeting new lows,
while the buyers will need a break higher to start targeting the 4,400 level
next.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, we can
see more clearly the spike to the downside yesterday which might have been
caused by stops getting hit after the break of the 4,110 support. The buyers
will likely continue to lean on the 4,110 support to keep targeting a pullback
into the trendline, while the sellers will look for a break to pile in for a
drop into the 3,885 level next. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Todaywe
have Fed’s Waller speaking and the latest US Jobless Claims figures. Tomorrow,
we conclude the week with the University of Michigan Consumer Sentiment survey.
This article was written by Giuseppe Dellamotta at investinglive.com.