Gold has seen a continuous rise of late, for no clear reason, as the usual inverse correlation with real returns has broken down. There is talk of massive buying by the central bank, with China at the forefront as it may seek to reduce risk from US Treasury bonds. Overall, gold should remain supported as we head into the easing cycle, but a more hawkish Fed could weigh on it in the near term. In fact, we can say that Wednesday’s US CPI report will likely decide its fate, as strong data is expected to trigger a hawkish revaluation in markets and weigh on prices in the near term, while weak numbers could stimulate further, as the Fed would do. gain more confidence to proceed with the first rate cut in June.
Gold Technical Analysis – Daily Timeline
Daily Gold
On the daily chart, we can see that gold continues to advance towards 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. However, such a large correction will likely only be triggered if the US CPI turns out to be stronger than expected on Wednesday.
Gold Technical Analysis – 1 Hour Time Frame
Gold 1 hour
On the hourly chart we can see that we have another minor trendline and the red moving average 21 for the confluence on this time frame. This is where we can expect buyers to step in again with a set risk below 2300 support to position themselves for a rally to new all-time highs. Sellers, on the other hand, will want to see price break below the trendline and support at 2300 build up and position themselves for a fall into the major trendline around the 2250 level.
Events to come
This week is going to be a little quieter on the data side, with US CPI being the main highlight. On Wednesday we will have the US CPI report which will likely decide whether the Fed will further delay rate cuts. On Thursday we will receive the US PPI and the latest US jobless claims figures. Finally, on Friday 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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