Gold continues to be supported by the negative risk
sentiment caused by the Israel-Hamas war. We’ve been seeing a clear pattern of
strong rallies into the weekend in the past three weeks as market participants
feared a ground offensive in Gaza and an escalation of the conflict. Last week,
the Israeli PM Netanyahu
confirmed that they were indeed preparing for a ground invasion and late on
Friday we got some early reports of the Israeli military entering Gaza.
This has led to another rally into the weekend.
Over the weekend, we got reports that a ground offensive was indeed
underway but as of now we haven’t got any escalation of the conflict as it
remains confined to the Levant. This might lead to a “buy the rumour, sell the
fact” reaction today and the technical levels will help with the positioning
into the next trades.
Gold Technical Analysis –
Daily Timeframe
Gold Daily
On the daily chart, we can see that Gold last
Friday broke above the key 1985 resistance as the
market wanted to position on a more defensive side going into the weekend. The
break above the resistance opened the door for a rally into the all-time high
around the 2075 level and we are also approaching a positive seasonal period
for Gold.
Gold Technical Analysis – 4
hour Timeframe
Gold 4 hour
On the 4 hour chart, we can see that the latest leg
higher is diverging with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we might see a pullback into the minor trendline and the
red 21 moving average where we
can expect the buyers to step in with a defined risk below the trendline to
position for another rally into new highs. The sellers, on the other hand, will
want to see the price breaking below the trendline to confirm the reversal and
pile in to target the 1950 support.
Gold Technical Analysis – 1
hour Timeframe
Gold 1 hour
On the 1 hour chart, we can see more
closely the bullish setup with the 61.8% Fibonacci
retracement level adding an extra layer of confluence. This
will be a key spot for market participants as a bounce is likely to lead to a
rally, while a breakout should trigger a selloff into the 1950 support where we
will find the buyers again positioning for another rally with an even better
risk to reward setup.
Upcoming Events
This week, we will get lots of tier one data points with
the US labour market and the FOMC decision in focus. Tomorrow, we have the US
Employment Cost Index and the Consumer Confidence report. On Wednesday, it will
be the time for the US ADP, the ISM Manufacturing PMI and the FOMC rate
decision. On Thursday we will get the US Jobless Claims data, while on Friday
we conclude the week with the US NFP report and the ISM Services PMI. Strong
data or a more hawkish than expected Fed are likely to weigh on Gold, while weak
reports should continue to support the yellow metal.
See the video below