Gold has been rallying
strongly this morning as a blue sweep in the US midterm elections became a reality.
As mentioned
yesterday, a Democratic congress is going to restrict further tax cuts, defence
spending and fiscal expansion in general. This is positive for gold because it’s
going to limit the rise in Treasury yields and the US dollar on lower rate hike
expectations.
It could also
support gold in case Trump decides to escalate the war with Iran as inflation
expectations would rise alongside weakening growth outlook, creating a
stagflationary environment.
Looking ahead, we have the US NFP report on Friday but it’s unlikely to
change much for the Fed unless we see a jump in wage growth or surprisingly
weak data. The focus will likely remain on US-Iran negotiations, but at this point,
it looks like both an escalation and a de-escalation would provide support gold.
GOLD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that gold(CFD contract) is approaching
the major downward trendline. We can expect the sellers to lean on the
trendline, with a defined risk above it, to target a break below the major
upward trendline. The buyers, on the other hand, will want to see the price
breaking higher to increase the bullish bets 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 now
have a minor upward trendline defining the bullish momentum. If we get a
pullback, we can expect the buyers to lean on the trendline, with a defined
risk below it, to keep targeting a break above the downward trendline. The
sellers, on the other hand, will want to see the price breaking lower to increase
the bearish bets and target a break below the major upward trendline.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, we
have a minor support zone around the 3,970 level. If we get a pullback, 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 to extend the pullback into the minor upward trendline next. The red
lines define the average daily range for today.
UPCOMING CATALYSTS
Todaywe
have the US ADP and the US ISM Services PMI. Tomorrow, we get the latest US
Jobless Claims figures. On Friday, we conclude the week with the US NFP report
and the University of Michigan Consumer sentiment survey.
This article was written by Giuseppe Dellamotta at investinglive.com.