Gold extended the
gains yesterday after breaking above a key trendline that’s been defining the
downtrend since September.
The breakout was driven
by a selloff in oil prices after the US Vice President Vance blamed the war
with Iran for the Republican Party’s heavy losses in the midterm elections. His
post published on X reinforced market expectations that the Trump
administration could seek an off-ramp from the war rather than escalate
military operations.
Keep in mind that
a Democratic congress is also going to restrict further tax cuts, defence
spending and fiscal expansion in general. And this is positive for gold because
it’s going to limit the rise in Treasury yields and the US dollar on lower rate
hike expectations.
It could also
support gold in case Trump decides to escalate the war with Iran as inflation
expectations would rise alongside weakening growth outlook given fiscal constraints,
creating a stagflationary environment.
Tomorrow, we have the US NFP report, but the data is unlikely to change the
Fed’s outlook much as the market got used to strong labour market data. The
focus will likely remain on US-Iran negotiations, but at this point, it looks
like both an escalation and a de-escalation would be bullish for gold.
GOLD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that gold (CFD contract) broke above
the key downward trendline yesterday opening the door for a rally into the 4,700
level. The buyers will likely continue to pile in around these levels, with a
defined risk below the trendline, to keep targeting new highs. 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 have
a minor support zone around the 4,080 level. If we get a pullback, we can
expect the buyers to step in around the support, with a defined risk below the broken
trendline, to keep pushing into new highs. The sellers, on the other hand, will
want to see the price falling back below the trendline to position for a drop
into the major upward trendline, targeting a breakout.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, we have a minor upward trendline defining the bullish momentum on this timeframe. Aggressive buyers will likely lean on the trendline, with a defined risk below it, to keep pushing into new highs. The sellers, on the other hand, will look for a break to extend the pullback into the 4,080 support, targeting a break below it. The red
lines define the average daily range for today.
UPCOMING CATALYSTS
Today we
get the latest US Jobless Claims figures. Tomorrow, we conclude the week with
the US NFP report and the University of Michigan Consumer sentiment survey.
This article was written by Giuseppe Dellamotta at investinglive.com.
