Gold Technical Analysis | Forexlive

Gold has erased all the gains from the past two
weeks following a massive reversal from the spike to the all-time high. Such
reversals are generally bad omens as they happen around tops or bottoms, but
the long-term fundamentals are still in favour for further upside. In fact, the
expectations of an upcoming rate cut cycle is a tailwind for Gold as it would
make real yields to fall.

What has changed in the short term though is that
the last Friday’s NFP report beat
expectations across the board with the unemployment rate falling to 3.7% vs.
3.9% previously and the wage growth on a monthly basis picking up more than
expected. As a result, the market repriced the rate cuts expectations in 2024
from 5 to 4 and real yields rose which ultimately weighed on Gold. The US CPI
and the FOMC rate decision in the next few days might reverse the entire
selloff or add even more fuel to it.

Gold Technical Analysis –
Daily Timeframe

On the daily chart, we can see the massive reversal
following the spike to the all-time high on last Monday. The price broke the trendline to the
downside which opened the door for a bigger drop into the swing low around the
1930 level where we can also find the 61.8% Fibonacci retracement level
for confluence. If we
get there, the buyers will step in more aggressively with a defined risk below
the swing low to position for a rally into new all-time highs with a great risk
to reward setup.

Gold Technical Analysis – 4
hour Timeframe

On the 4 hour chart, we can see that we have a
couple of resistance levels for the sellers where they can lean onto to
position for further downside. The first one comes right around the previous
swing low at 2010, while the other one stands at the 2040 level. The sellers
might want to split their order in half as it’s hard to know which level the
market will be rejected from. The buyers, on the other hand, will want to see
the price breaking above the 2040 level to invalidate the bearish setup and
position for a rally into new all-time highs.

Gold Technical Analysis – 1
hour Timeframe

On the 1 hour chart, we can see more
closely the current price action with the price breaking the lows. If the
bearish momentum remains strong, we can expect the sellers to keep piling in to
extend the drop to the 1930 level although the risk to reward would be worse.

Upcoming Events

This week is going to be a big one with the US CPI and
the FOMC rate decision on the agenda. We begin tomorrow with the release of the
US CPI report where the market will want to see how the disinflationary trend
is going. On Wednesday, we have the US PPI data followed by the FOMC rate
decision where the Fed is expected to keep interest rates unchanged. On
Thursday, we will see the US Retail Sales and Jobless Claims figures, while on
Friday we conclude the week with the US PMIs. Weak data is likely to support
Gold, while strong figures should keep on weighing on it.

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