Gold sold off
yesterday after Fed’s Waller surprised markets with some very hawkish remarks
in his speech on the economic outlook .
He suggested that
a rate hike in December would be warranted regardless of yesterday’s inflation
data, adding that the only thing the data would influence would be the size of
the increase. In fact, he said that a Core CPI M/M reading of 0.3% or higher
would lead him to vote for a larger 50 bps hike.
His remarks
triggered a hawkish repricing, sending Treasury yields and the US dollar higher.
Gold came under pressure as real yields also moved higher.
The Core CPI then came in at 0.3% , extending gold’s losses as traders increased further their
expectations of a 50 bps rate hike in December.
Meanwhile, nothing
has changed on the US-Iran front. Qatar said yesterday that it secured at least
two weeks for diplomatic efforts, adding that significant differences remain.
So, the expectations for an imminent deal might need to be repriced and that should
lead to a rebound in oil prices.
I would expect
rate hikes to put even more downward pressure on the stock market and long-term
Treasury yields going forward amid increased growth concerns, barring an end to
the Iran war of course. This could ultimately be positive for gold.
Keep in mind that
in the current context, if Trump decides to escalate the war, inflation
expectations would rise alongside weakening growth outlook, creating a
stagflationary environment. This should be bullish for gold. At the same time,
if we get a de-escalation, we could see a dovish repricing on easing inflation
concerns, which should also support gold in the short-term.
GOLD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that gold (CFD contract) is still consolidating
above the broken trendline despite yesterday’s dip. The buyers piled in on the
retest of the broken trendline, with a defined risk below it, targeting the
4,700 level. The sellers, on the other hand, will need to see the price breaking
below the major upward trendline to open the door for new lows.
GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME
On the 4 hour chart, we can
see more clearly yesterday’s pullback into the 4,040 support zone where we have
also the confluence of the broken downward trendline and the minor upward trendline.
The buyers will likely continue to step in around these levels, with a defined
risk below the upward trendline, to keep targeting the 4,700 level. The sellers,
on the other hand, will want to see the price breaking below the upward
trendline to position for a drop into the major upward trendline next.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here as the buyers will likely continue to pile in around
the support zone to keep targeting new highs, while the sellers will wait for a
break below the upward trendline to extend the drop into new lows. The red
lines define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow we get the latest US Jobless Claims figures. On
Friday, we conclude the week with the US PPI data.
This article was written by Giuseppe Dellamotta at investinglive.com.
