Gold remains supported amid dovish Fed bets and weaker US data | investingLive

Fundamental
Overview

Gold jumped into a new
all-time high on Friday following another soft
NFP report. The dovish bets on the Fed increased as a result and the market
is now expecting three rate cuts by year-end. Moreover, we have also an 8%
probability of a 50 bps cut in September but that will likely happen only if we
get a soft CPI report on Thursday. In that case, gold might get another boost.

The fundamentals for gold have
been positive for months and years, but more recently the dovish Powell’s tilt
at the Jackson Hole Symposium acted as a catalyst for the rally into new all-time
highs. In fact, real yields kept on falling steadily supported by stronger
dovish bets and weaker US data.

Looking ahead, we have the
US CPI report on Thursday and then the FOMC meeting next week. 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. In the short-term
though, hawkish repricing in interest rates expectations will likely keep on triggering
corrections.

Gold
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that after breaking into new all-time highs, gold eventually extended the
rally into the 3,600 level where it stalled. From a risk management
perspective, the buyers will have a better risk to reward setup around the
prior all-time high at 3,500. The sellers, on the other hand, will look for a
break below the 3,500 level to start targeting the 3,245 level next.

Gold Technical Analysis
– 4 hour Timeframe

On the 4 hour chart, we can
see that we have an upward trendline defining the bullish momentum. If
we get a pullback into the trendline, we can expect the buyers to lean on it
with a defined risk below it to keep pushing into new highs. The sellers, on
the other hand, will look for a break lower to increase the bearish bets into
the 3,245 level next.

Gold Technical Analysis
– 1 hour Timeframe

On the 1 hour chart, we can
see that we have another minor upward trendline and a minor support zone around
the 3,575 level. The buyers will likely continue to step in around the support
with a defined risk below the trendline to keep pushing into new highs, while the
sellers will look for a break below the trendline to position for a pullback
into the major trendline next.

On an intraday basis, if
the momentum remains strong, the buyers will likely pile in on a break above
the counter trendline. The red lines define the average daily range for today.

Upcoming
Catalysts

On Wednesday we have the US PPI report. On Thursday,
we get the US CPI report and the latest US Jobless Claims figures. On Friday,
we conclude the week with the University of Michigan Consumer Sentiment report.

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