The Israeli retaliation truly marked a high for gold as geopolitical risk faded and the market caught up with rising U.S. real yields. The trend could reverse and some key technical breakouts add to the chances of seeing a strong downward correction. Going forward, bears will need to see the strength of US data continue, as rapid deterioration would likely invalidate the bearish scenario.
Gold Technical Analysis – Daily Time Frame
Daily Gold
On the daily chart we can see that gold recently fell below a key trendline and after some consolidation it has continued to fall, driven by market positioning in a hawkish Fed and the report hot US ECI for the first quarter yesterday. All things being equal, the natural target should be around the next trendline close to the previous all-time high at 2145, which can be reached if US data continues to be hot.
Gold Technical Analysis – 1 Hour Timeframe
Gold 1 hour
On the hourly chart, we can see that price broke the bearish flag to the downside, increasing bearish momentum as sellers accumulated more aggressively. Technically, the measured target is around the 2220 level. From a risk management perspective, sellers will have a better risk to reward setup around the 2320 level as we will find the downtrend line acting as resistance, even whether we will likely need weak US data releases or a dovish Fed to get there. A break above the trendline should see buyers step in with more conviction, while a break above the 2352 high would invalidate the bearish setup.
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