Basic overview
Gold briefly fell below the 4,000 level in the Asian session but quickly recovered its losses. Nothing has changed on the fundamental side as precious metals remain under pressure due to the Fed tightening risks.
There is a 31% chance of a rate hike in July and a 64% chance of a move in September, with a total of 33 basis points of tightening expected by the end of the year. There has been a bit of a cautious repricing in the past few days.
One reason may be the massive sell-off in oil prices, which have now reached pre-war levels. The other reason is that the tight repricing has peaked in the near term, and we will likely need upside surprises in the Non-Farm Payrolls and CPI reports.
Overall, there is little reason to price in any further interest rate increases at the moment. Therefore, we will either see further declines in the coming days, or price action will remain range-bound until we get the US data. Chasing lower prices right now without a meaningful new catalyst looks bad from a risk versus reward perspective.
In terms of economic data, given the Fed’s focus on inflation, the US CPI will likely be more important for market pricing unless we get a successful NFP report. In line with or worse than expected data, this should lead to a fairly broad-based pullback, with gold benefiting from some cautious repricing.
Technical analysis of gold – daily time frame
Gold – daily
On the daily chart, we can see that gold fell below the 4000 level again in the Asian session but quickly recovered all its losses. The natural target remains 3885 but the bearish momentum is clearly fading as aggressive repricing peaked last week. If the price drops to the 3,885 level, we can expect buyers to step in with specific risks below the level in order to prepare for a rise to the major downtrend line. On the other hand, sellers will want to see the price break down to increase bearish bets on the major uptrend line around the 3,700 level.
Technical analysis of gold – 4-hour time frame
Gold – 4 hours
On the 4-hour chart, we can see the price breaking below the sub-opposite trend line and is now retesting it. Sellers are likely to intervene around the broken trend line with a definite risk above it to continue pushing towards new lows. On the other hand, buyers will want to see the price break higher to be able to rise to the major downtrend line.
Technical analysis of gold – 1 hour time frame
Gold – 1 hour
On the hourly chart, there is not much we can add here, but if we get a break above the trend line, we can expect the pullback to extend to the swing high around the 4,096 level. This is where sellers will have a better risk to reward setup to target new lows, while buyers will need a break to open the door to new highs. Red lines define Average daily range For today.
Upcoming stimuli
todayWe get US jobs data and the US Consumer Confidence report. Tomorrow, we have US ADP, US ISM Manufacturing PMI and Fed Chairman Warsh speaking. We conclude on Thursday with the US Non-Farm Payrolls report and US unemployment claims numbers.
