Gold has been rallying non-stop lately for no clear reason as the usual inverse correlation with real yields broke down. There are talks of heavy central bank buying with China being at the forefront as it might be looking to de-risk from US Treasury bonds. In the big picture, Gold should remain supported as we head into the easing cycle, but a more hawkish Fed could weigh on it in the short term. In fact, we can say that the US CPI report on Wednesday will likely decide its fate as strong data should trigger a hawkish repricing in the markets and weigh on the price in the short term, while weak figures could boost it further as the Fed might gain more confidence to deliver the first rate cut in June.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that Gold continues to rally into new all-time highs with almost no pullbacks along the way. From a risk management perspective, the buyers will have a much better risk to reward setup around the trendline where they will also find the red 21 moving average for confluence. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the next major trendline around the 2100 level.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the latest move higher is diverging with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it could be a signal for a pullback into the trendline where we can also find the 50% Fibonacci retracement level for confluence. Such a big correction though will likely be triggered only if the US CPI comes out stronger than expected on Wednesday.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have another minor trendline and the red 21 moving average for confluence on this timeframe. This is where we can expect the buyers to step in again with a defined risk below the 2300 support to position for a rally into new all-time highs. The sellers, on the other hand, will want to see the price breaking below the trendline and the 2300 support to pile in and position for a drop into the major trendline around the 2250 level.
Upcoming Events
This week is going to be a bit more tranquil on the data front with the US CPI being the main highlight. On Wednesday, we have the US CPI report which will likely decide if the Fed is going to delay rate cuts further. On Thursday, we get the US PPI and the latest US Jobless Claims figures. Finally, on Friday we conclude the week with the University of Michigan Consumer Sentiment survey. Strong data is likely to weigh on Gold, while weak figures should give it a boost.
