Despite the surging Treasury yields and a stable US
Dollar, Gold continues to set new highs as the focus remains on the Middle East.
In fact, if we just track the most important developments in the Middle East,
we can see how Gold first gapped higher following the Hamas attack against
Israel back on October the 7th. We then had another big rally into
the following weekend as Israel was reportedly ready to start a ground
operation in Gaza.
The waters calmed down on Monday as the
expectations around the ground operation didn’t match the reality, but late
Tuesday a rocket hit a hospital in Gaza killing hundreds of civilians and
sparking a global outrage. Following this unfortunate event, Gold broke out of
a key trendline and started another rally, eventually culminating in another
spike into a key resistance following the news that the Israeli military
received the green light to move into Gaza.
Gold Technical Analysis –
Daily Timeframe
Gold Daily
On the daily chart, we can see that Gold has
reached a key resistance around
the 1985 level. A break above this level would open the door for a rally into
the highs. We can expect the sellers to step in here with a defined risk above
the resistance to target the lows again. This incredibly strong rally is also
overstretched now as depicted by the distance from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next move.
Gold Technical Analysis – 4
hour Timeframe
Gold 4 hour
On the 4 hour chart, we can see that we have a good
support zone around the trendline where we
can also find the 38.2% Fibonacci retracement level
and the red 21 moving average for confluence. This is
where we can expect the buyers to step in with a defined risk below the
trendline to target a break above the resistance and the all-time highs next.
The sellers, on the other hand, will want to see the price breaking lower to
increase the bearish bets into the lows.
Gold Technical Analysis – 1
hour Timeframe
Gold 1 hour
On the 1 hour chart, we can see that we
have a divergence with
the MACD right
at the key resistance. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. In this case, from a risk management
perspective, the buyers would be better off to wait for a pullback into the
trendline before opening new longs. The last line of defence for the buyers
should be around the broken downward trendline and the 61.8% Fibonacci
retracement level.