Fundamental
Overview
Gold eventually extended
the losses as the preliminary
US-China deal reached over the weekend weighed on the market as traders positioned
into a positive Trump-Xi meeting. In the short-term, there are no strong
reasons to pile into longs at the moment, so we might create another range
around the 4,000 level.
Nonetheless, there are
still bearish risks ahead. The first one is today as we have the FOMC policy
decision. The Fed is expected to cut interest rates by 25 bps and signal an end
to QT. The focus will likely be on Fed Chair Powell. If he sounds even a bit
uncertain on a rate cut in December, then the market will likely take that as a
hawkish surprise and gold should drop to new lows. Conversely, if he keeps the
status quo, then it would be seen as neutral or slightly positive for gold.
In the bigger picture, gold
should remain in an uptrend as real yields will likely continue to fall amid
the Fed’s dovish reaction function. But in the short term, a hawkish repricing
in interest rate expectations could keep weighing on the market.
Gold
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that gold eventually broke below the trendline and extend the losses as the
sellers increased the bearish bets into new lows. The breakout opened the door
for a move into the major trendline around the 3,600 level but we might need a
less dovish Fed or strong US data to get there.
If we get there, we can expect
the buyers to lean on the trendline with a defined risk below it to position
for a rally into a new all-time high. The sellers, on the other hand, will look
for a break lower to extend the drop into the 3,300 level next.
Gold Technical Analysis
– 4 hour Timeframe
On the 4 hour chart, we can
see that we are breaking above a downward trendline, which could be a signal of
a change in the short-term momentum and open the door for a pullback into the
4,138 level. The buyers will likely pile in around these levels with a defined
risk below the 3,945 level to position for a rally into the 4,138 level.
The
sellers, on the other hand, will want to see the price falling back below the
trendline and the 4,138 level to leave behind a fakeout and increase the
bearish bets into the 3,819 level next.
Gold Technical Analysis
– 1 hour Timeframe
On the 1 hour chart, we can
see that we have a minor resistance zone around the 4,000 and 4,020 level. This
is where we can expect the sellers to step in with a defined risk above the resistance
to position for a drop into new lows. The buyers, on the other hand, will look
for a break higher to increase the bullish bets into the 4,138 level next.
Moreover, we can see that
we have a minor upward trendline defining the current pullback. If the price
pulls back into the trendline, we can expect the buyers to lean on it with a
defined risk below it to keep pushing into new highs, while the sellers will
look for a break lower to increase the bearish bets into the 3,819 level next. The
red lines define the average daily range for today.
Upcoming
Catalysts
Today we have the FOMC policy decision, while tomorrow we have the
Trump-Xi meeting.
Video
This article was written by Giuseppe Dellamotta at investinglive.com.