FUNDAMENTAL
OVERVIEW
After the surprising US-Iran breakthrough on Thursday, gold has erased all last
week’s losses as traders pared back rate hike bets on expectations of lower oil
prices and easing inflation concerns.
In the short-term, the focus continues to be on this new development, so we
can expect the bullish bias to hold (all else being equal). Looking ahead, the FOMC
decision tomorrow could be a major catalyst.
The Fed is widely expected to keep interest rates unchanged and remove the
easing bias from the statement. At this meeting, we will also get the Summary
of Economic Projections (SEP) where inflation is expected to be revised higher
while unemployment lower in the short-term. The focus will be mostly on the dot
plot which is expected to show no cuts this year. All of this is expected and
already priced in.
We can expect gold to get a significant boost if the Fed maintains the
easing bias and/or one rate cut by year-end. The hawkish surprise could be the
Fed signalling one or more rate hikes by year-end in which case we can expect gold
to sink.
Looking ahead, the risk is that negative supply shock caused by the US-Iran
war turns into a positive demand shock as the conflict ends that boosts
economic activity further requiring rate hikes anyway.
GOLD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that gold avoided a complete breakdown after the surprising US-Iran
breakthrough. The price has risen above the broken upward trendline opening the
door for a bigger pullback into the major downward trendline. If the price gets
there, we can expect the sellers to lean on the downward trendline with a
defined risk above it to position for a drop into new lows. The buyers, on the
other hand, will look for a break to extend the rally into the 5,400 level
next.
GOLD
TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have
the 4,350 resistance zone and the minor downward trendline that the price will
need to break to open the door for a bigger move into the 4,700 level next. The
sellers will likely step in around the resistance and/or the trendline with a
defined risk above the trendline to keep pushing into new lows. The buyers, on
the other hand, will look for breaks to increase the bullish bets into the
major trendline around the 4,700 level.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, we can
see the price started the week with a positive gap and stalled at the
resistance. The gap might act as support now. If we get a pullback into the
4,250 level, we can expect the buyers to step in with a defined risk below the
support to position for a rally into the 4,700 level next. The sellers, on the other
hand, will want to see a break lower to pile in for a drop into new lows. On Thursday, we get the latest US Jobless Claims figures
