The uncertainty around inflation due to another increase in energy prices and the risk of a recession continue to keep Gold in a range. In fact, we saw a rally in Gold around the end of August as the US data started to surprise to the downside with the labour market indicators showing weakness, but then the data restarted to show strength and Gold sold off again. Last Friday, we got a rally in Gold which was caused mainly by a technical breakout as there was no data supporting such a move. Therefore, we can expect Gold to erase the gains unless we see weakness in data.

Gold Technical Analysis – Daily Timeframe

Gold Technical Analysis
Gold Daily

On the daily chart, we can see that Gold rallied last Friday bouncing near the key 1893 support level. The price is now back to a strong resistance where we should find strong sellers piling in with a defined risk above the resistance to target another selloff into the 1893 support. The buyers will need the price to rise above the 1934 resistance to switch the bias from bearish to bullish.

Gold Technical Analysis – 4 hour Timeframe

Gold Technical Analysis
Gold 4 hour

On the 4 hour chart, we can see that we had a divergence with the MACD as the price was approaching the 1893 support. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the sellers leant on the strong resistance around the 1915 level where we had the confluence with the trendline, the 50% Fibonacci retracement level and the previous support turned resistance. Once the price broke through the resistance, the sellers folded, and the buyers piled in taking the price quickly into the 1934 resistance zone.

Gold Technical Analysis – 1 hour Timeframe

Gold Technical Analysis
Gold 1 hour

On the 1 hour chart, we can see that we have another minor divergence around the resistance as the bullish momentum started to fade. This might even turn into a double top pattern with the target standing right at the previous resistance now turned support at 1915. In fact, we should see the sellers piling in here to target the 1915 level first and ultimately the 1893 support. The buyers, on the other hand, will want to see the price breaking above the resistance to pile in even more aggressively and target the 1984 level.

Upcoming Events

This week has just a couple of important economic releases with the FOMC rate decision on Wednesday being the highlight. The Fed is expected to keep rates unchanged, and the market will focus more on the Dot Plot and Fed Chair Powell’s press conference, although he’s likely to repeat that they remain data dependent. Moving on to Thursday, we will see another US Jobless Claims report, while on Friday we conclude the week with the US PMIs data. Although gold remains rangebound in the bigger picture, strong data is likely to weigh on the yellow metal while weak readings should give it a boost.

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