Fundamental Overview

Last Friday, gold spiked to the upside following the US NFP report. The data showed some more labour market cooling with an increase in the unemployment rate and a decrease in wage growth. That made the real yields to drop and gold to accelerate to the upside. This has been the case for a couple of years now where a rise in real yields sees a much smaller fall in gold compared to a fall in real yields which triggers a bigger rally in gold.

As of now, it looks like gold have limited downside but lots of upside as inflation abates slowly while risks to the growth picture increase the longer the Fed keeps policy restrictive. In the short-term, strong US data might weigh a bit on the market, but in the long-term weak data is likely to trigger bigger upside moves.

Gold Technical Analysis – Daily Timeframe

Gold Technical Analysis
Gold Daily

On the daily chart, we can see that gold has been on a steady rise since bottoming out near the key 2277 support as the buyers piled in around the bottom of the range and are now looking towards the cycle high around the 2430 level. If the price gets there, we can expect the sellers to step in around the top of the range to position for a drop back into the 2277 support targeting a break below it.

Gold Technical Analysis – 4 hour Timeframe

Gold Technical Analysis
Gold 4 hour

On the 4 hour chart, we can see that the price rallied into the 2387 resistance following the soft US NFP report and started to pull back. We now have a good support zone around the 2368 level where we can also find the confluence of the previous swing high, the minor trendline and the 61.8% Fibonacci retracement level.

This is where we can expect the buyers to step in with a defined risk below the trendline to position for a break above the 2387 resistance. The sellers, on the other hand, will want to see the price breaking below the trendline to increase the bearish bets into the 2277 support.

Gold Technical Analysis – 1 hour Timeframe

Gold Technical Analysis
Gold 1 hour

On the 1 hour chart, we can see more clearly the recent price action and the bullish setup around the 2368 level. We can also notice that we have the lower limit of the average daily range for today right around the support, so that should give the buyers a bit more confidence to pile in around the 2370 level looking for a continuation of the uptrend.

Upcoming Catalysts

This week is a bit bare on the data front but nonetheless we will have some key economic releases. Tomorrow, we have Fed Chair Powell testifying to Congress and the markets will be focused on any view or hint about the monetary policy trajectory after the recent NFP report. Thursday will be the most important day of the week as we get the US CPI and the US Jobless Claims figures. Finally, on Friday, we conclude the week with the US PPI and the University of Michigan Consumer Sentiment survey.

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