Fundamental
Overview
Gold rallied strongly on Friday
as Fed Chair Powell tilted more dovish by saying that “with policy in
restrictive territory, the baseline outlook and the shifting balance of risks
may warrant adjusting our policy stance.”
That saw traders firming up
expectations for a rate cut in September and a total of two cuts by year-end. Now,
the focus turns to the US NFP report next week which is going to be crucial and
will influence greatly interest rates expectations.
Strong data might take the
probability for a September cut towards a 50/50 chance but will certainly see a
more hawkish repricing further down the curve and weigh on gold. Soft data, on
the other hand, will likely see traders increasing the dovish bets with a third
cut by year-end being priced in and giving gold a boost.
In the bigger picture, gold
should remain in an uptrend as real yields will likely continue to fall amid
Fed easing given their dovish reaction function. There’s
not much else we can glean from this timeframe as market participants will
likely continue to play the range until we get a breakout on either side. We
need to zoom in to see some more details.
Gold Technical Analysis
– 4 hour Timeframe
On the 4 hour chart, we can
see that we got a rally on Friday and then a pullback yesterday into the most
recent swing level at 3,350. The buyers stepped in around the swing level to
position for further upside into the resistance. If we were to get another
pullback, the buyers will likely pile in around the swing level again, while
the sellers will look for a break lower to position for a drop into the 3,245
support next.
Gold Technical Analysis
– 1 hour Timeframe
On the 1 hour chart, there’s
not much else we can add here. On an intraday basis, we have a minor resistance
around the 3,379 level. The buyers will want to see the price breaking higher
to increase the bullish bets into the major resistance, while the sellers will
likely pile in around these levels with a defined risk above the resistance to
target the 3,350 swing level. On Thursday, we get the latest US Jobless Claims figures. On Friday, we
conclude the week with the US PCE price index
