FUNDAMENTAL
OVERVIEW
The strong bullish momentum
seems to have waned for the time being as we enter a potential pivotal month
for gold. It’s not clear what caused yesterday’s drop as pretty much all markets
went down at the same time. There were only talks of multiple US warships
arriving in the Middle East but given that oil prices dropped too, I wouldn’t
bet on that reason.
Overnight, we got reports
that Trump was going to announce his Fed chair pick today and everything
suggested that it was going to be Kevin Warsh. We got a hawkish reaction across
markets as Warsh was a hawk during his last term at the Fed, although the
historical stance is never a guarantee.
The narratives underpinning
gold in the past several months have been the same, that is de-dollarisation,
geopolitical tensions, and so on. Given the lack of bearish catalysts, the
price continued to rise just by inertia. We reached a point where it looks like
just FOMO rather than something fundamental because these prices are not
justified in the short-term.
Since last week, I’ve been
turning more bearish in the short-term as I feel like we are reaching an
inflection point and February could be the first major negative month for
precious metals if the right conditions fall in place.
The most important catalyst
next week could be the US NFP report. 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.
The other top tier data
could also start to weigh on gold if they come out strong, but the NFP report
should be the main event of the week. 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 sold off back to the upper bound of the channel which is now acting as
support. This is where we can expect the buyers to step in with a defined risk
below the trendline to position for a rally into new record highs. The sellers,
on the other hand, will want to see the price breaking lower to pile in for a
drop into the bottom trendline around the 4600 level next.
GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME
On the 4 hour chart, we can
see more clearly the rejections at the upper bound of the channel as the
dip-buyers started to step in. There’s not much we can add here as the buyers
will continue to pile in to target new highs, while the sellers will look for a
break lower to extend the drop into the next trendline around the 4800 level.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, we can
see that we have a minor downward trendline that could define a potential
future triangle as the price consolidates here. If the price gets there, we can
expect the sellers to lean on the trendline with a defined risk above the
trendline to keep pushing into new lows, while the buyers will look for a break
higher to increase the bullish bets into new record highs. The red lines define
the average daily range for today.
UPCOMING CATALYSTS
Today we conclude the week with the US PPI report and Trump’s announcement
of his Fed chair pick.
This article was written by Giuseppe Dellamotta at investinglive.com.