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 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 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 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.
See also the video below