FUNDAMENTAL
OVERVIEW
Gold broke through a key technical
level yesterday and extended the gains into new record highs. We had a weak US
Consumer Confidence report that provided support to the market, but the
momentum increased when talking to the press Trump
suggested that he wasn’t concerned with the decline in the dollar at all.
The narratives underpinning
gold continue to be de-dollarisation, geopolitical tensions, and so on. Given
the lack of bearish catalysts, the price continues to rise just by inertia. I
personally think that this is now more about FOMO rather than something
fundamental.
I’m not saying that the
long-term trend is over, but the current levels are not justified in the
short-term. I think we are at an inflection point and February could be the
first major negative month for precious metals if the right conditions fall in
place.
Today, the focus will be on
the FOMC decision where the central bank is expected to keep everything unchanged.
The focus will be on Powell’s press conference during which he could pull out a
surprise by announcing that he intends to remain on the board of governors
until his term ends in 2028. That could be taken as a strong fight for Fed independence,
and we could see some downside in gold in the short-term.
We could also get the new
Fed chair announcement. Betting markets now see BlackRock’s Rieder as the
favourite. Rieder or Waller could ease Fed independence risks and could weigh
on precious metals.
The other major catalyst
could be the US NFP report next week. We’ve been seeing improvements in the US
Jobless Claims data that seem to suggest a pickup in labour market activity. A
strong report would trigger a hawkish repricing in interest rate expectations
and put pressure on gold. In case we don’t get the bearish catalysts, gold could keep on rising just by inertia.
GOLD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see gold broke above the top trendline and extended the gains into new record highs.
From a risk management perspective, the buyers will have a better risk to
reward setup around the broken trendline to keep pushing into new highs, while
the sellers will want to see the price falling back below the trendline to position
for a drop into the bottom trendline next.
GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME
On the 4 hour chart, we can
see that we have a minor upward trendline defining the bullish momentum on this
timeframe. The buyers will likely continue to lean on the trendline to keep
pushing into new highs, while the sellers will look for a break lower to pile
in for a drop into the next trendline around the 4800 level.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here as piling in at these levels looks awful from a risk
to reward perspective. The buyers should wait for a pullback into the trendline
to position for new highs with a defined risk below the trendline. The sellers,
on the other hand, will need the price to break below the trendlines to open
the door for a correction into the 4800 level. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we have the FOMC policy announcement and a potential new Fed chair
pick. Tomorrow, we get the latest US Jobless Claims figures. On Friday, we
conclude the week with the US PPI report.
This article was written by Giuseppe Dellamotta at investinglive.com.