Gold has erased all the gains from the past two weeks following a massive reversal from the spike to the all-time high. Such reversals are generally bad omens as they happen around tops or bottoms, but the long-term fundamentals are still in favour for further upside. In fact, the expectations of an upcoming rate cut cycle is a tailwind for Gold as it would make real yields to fall.

What has changed in the short term though is that the last Friday’s NFP report beat expectations across the board with the unemployment rate falling to 3.7% vs. 3.9% previously and the wage growth on a monthly basis picking up more than expected. As a result, the market repriced the rate cuts expectations in 2024 from 5 to 4 and real yields rose which ultimately weighed on Gold. The US CPI and the FOMC rate decision in the next few days might reverse the entire selloff or add even more fuel to it.

Gold Technical Analysis – Daily Timeframe

Gold Technical Analysis
Gold Daily

On the daily chart, we can see the massive reversal following the spike to the all-time high on last Monday. The price broke the trendline to the downside which opened the door for a bigger drop into the swing low around the 1930 level where we can also find the 61.8% Fibonacci retracement level for confluence. If we get there, the buyers will step in more aggressively with a defined risk below the swing low to position for a rally into new all-time highs with a great risk to reward setup.

Gold Technical Analysis – 4 hour Timeframe

Gold Technical Analysis
Gold 4 hour

On the 4 hour chart, we can see that we have a couple of resistance levels for the sellers where they can lean onto to position for further downside. The first one comes right around the previous swing low at 2010, while the other one stands at the 2040 level. The sellers might want to split their order in half as it’s hard to know which level the market will be rejected from. The buyers, on the other hand, will want to see the price breaking above the 2040 level to invalidate the bearish setup and position for a rally into new all-time highs.

Gold Technical Analysis – 1 hour Timeframe

Gold Technical Analysis
Gold 1 hour

On the 1 hour chart, we can see more closely the current price action with the price breaking the lows. If the bearish momentum remains strong, we can expect the sellers to keep piling in to extend the drop to the 1930 level although the risk to reward would be worse.

Upcoming Events

This week is going to be a big one with the US CPI and the FOMC rate decision on the agenda. We begin tomorrow with the release of the US CPI report where the market will want to see how the disinflationary trend is going. On Wednesday, we have the US PPI data followed by the FOMC rate decision where the Fed is expected to keep interest rates unchanged. On Thursday, we will see the US Retail Sales and Jobless Claims figures, while on Friday we conclude the week with the US PMIs. Weak data is likely to support Gold, while strong figures should keep on weighing on it.

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