Despite
the surging real yields and US Dollar in the past few months, Gold continued to
show remarkable resilience decoupling from the usual correlations. This week
though, Gold capitulated, and has been falling everyday with stronger and
stronger intensity. The last week’s FOMC meeting might have been a wakeup call
for the market as the Fed made it clear that they won’t ease their monetary
policy as fast as the market expects. The problem for Gold bulls now is that
it’s been diverging with real yields and the greenback for a long time and if
it starts to catch up with the usual correlation, we might see much lower
prices next.
Gold Technical
Analysis – Daily Timeframe
Gold Daily
On the daily chart, we can see that since the
fakeout on the 1934 resistance, Gold
started to fall with almost no pullback and has even broken below the low
yesterday. This break opened the door for a fall into the 1800 level which
would erase all the gains seen after the collapse of the Silicon Valley Bank
back in March.
Gold Technical Analysis – 4
hour Timeframe
Gold 4 hour
On the 4 hour chart, we can see that from a risk
management perspective, the sellers will be better off if the price pulled back
all the way up to the trendline where
there’s also the confluence with the
previous low, the 38.2% Fibonacci retracement level
and the red 21 moving average. The
price is indeed a bit overstretched to the downside at the moment, but such a
big correction might happen only with some negative economic data that makes
the real yields and the greenback to pull back as well.
Gold Technical Analysis – 1
hour Timeframe
Gold 1 hour
On the 1 hour chart, we can see that we
have another minor trendline which might have higher chances of working out if
this strong bearish momentum is to continue. In fact, we can expect the sellers
to lean on the trendline and the red 21 moving average with a defined risk above
the trendline to position for more downside. The buyers, on the other hand,
will want to see the price breaking above the minor trendline to position for a
rally into the major trendline.
Upcoming Events
Today the main event will be the US Jobless Claims
report. Strong data is likely to keep weighing on Gold as that should keep real
yields and the US Dollar supported. On the other hand, weak readings should
provide some relief for Gold and lead to a correction. Tomorrow, we will see
the latest US PCE data which is unlikely to change much in terms of market
pricing unless we see some big surprises.
See also the video below