Yesterday we received another hot US CPI report that pushed back expectations for rate cuts, with the market now pricing in lower rate cuts than the Fed’s dot chart. As a result, real yields and the US dollar rose sharply, putting downward pressure on gold. The usual inverse correlation with real yields has recently broken down, with rumors of massive central bank buying as a possible cause.
It could have just been a momentum trade, however, and the CPI report could have been the catalyst that marked the top. Overall, gold should remain supported as we head into the easing cycle, but in the near term, the hawkish reassessment of rate cut expectations should weigh on gold, especially if rate hikes begin to be offered at some point.
Gold Technical Analysis – Daily Timeline
Daily Gold
On the daily chart, we can see that gold has reached new all-time highs with virtually no pullbacks along the way. From a risk management perspective, buyers will have much better risk to reward a setup around the trendline where they will also find the red 21 moving average for the confluence. Sellers, on the other hand, will want to see the price decline to increase bearish bets on the next major trendline around the 2100 level.
Gold Technical Analysis – 4 Hour Time Frame
Gold 4 hours
On the 4-hour chart, we can see that the latest bullish move is diverging with the MACD, which is usually a sign of weakening momentum, often followed by pullbacks or reversals. In this case, this could be the signal for a pullback in the trendline where we can also find the 50% Fibonacci retracement level for the confluence. Sellers should accumulate on a break below the minor trendline to position themselves for a decline into the trendline around the 2267 level. Buyers, on the other hand, will likely step in here with defined risk in below the minor trend line to position for a rally to new highs.
Gold Technical Analysis – 1 Hour Time Frame
Gold 1 hour
On the hourly chart we can see that we have a counter-trend around level 2352 marked by the green box. If price were to break above the counter-trend line, buyers would regain control and we would likely see a rally to a new all-time high. Conversely, if the price were to cross the minor trendline around the 2334 level, sellers are expected to intervene more aggressively and extend the decline to the 2267 level.
Events to come
Today we receive the US PPI report and the latest US jobless claims figures. Tomorrow we wrap up the week with the University of Michigan Consumer Sentiment Survey. Strong data should weigh on gold, while weak numbers should give it a boost.
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