FUNDAMENTAL
OVERVIEW
Gold maintains the bearish bias following the hawkish Fed dot plot last
week as the central bank’s tightening bias led to a rise in real yields and a
stronger US dollar.
As a reminder, the Fed delivered a hawkish surprise by projecting a rate
hike this year (the consensus was for no cuts or hikes). The market increased
rate hike bets with now 41 bps of tightening priced in by year-end. There’s a 36%
chance of a hike already in July and 74% probability of a move in September.
The economic data and financial markets will now guide the Fed as Warsh
stated that “financial markets perform best when they react to incoming data
and are less efficient when they have to ask how the Federal Reserve will react
to the incoming data”. He added that “financial markets are the most important
source of information to guide the central bank”.
Trump also posted on Truth Social and, unlike his usual stance under Fed
Chair Powell, did not object to the Fed’s decision. In fact, he said that “rate
hikes could happen,” which sounds like a green light for Warsh and the Fed to
do whatever they deem necessary.
The signal is that the Fed is finally looking to deliver on its price
stability mandate and bring inflation back to the 2% target that it’s been
missing since 2021. If the data says they need to hike, they will. This
should keep weighing on gold at least until the next set of economic data.
GOLD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
Gold – daily
On the daily chart, we can
see that gold fell below the upward trendline again shifting the bias back to
bearish. The natural target should be the 3,885 level. We can expect the
sellers to continue to step in around the broken trendline to keep pushing into
new lows, while the buyers will need the price to rise back above the trendline
to open the door for new highs.
GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME
Gold – 4 hour
On the 4 hour chart, we have
a strong resistance zone around the 4,250 level where there’s also the broken trendline
for confluence. If the price gets there, we can expect the sellers to step in
with a defined risk above the trendline to position for a drop into the 3,885
level. The buyers, on the other hand, will look for a break to extend the
pullback into the 4,350 level next.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
Gold – 1 hour
On the 1 hour chart, we have
a minor upward counter-trendline defining the current pullback. The buyers will
likely continue to lean on it to keep pushing into new highs, while the sellers
will look for a break to increase the bearish bets into the 3,885 level next. The
red lines define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow, we have the US
Flash PMIs. On Thursday, we get the US Jobless Claims data and the US PCE
report. On Friday, we conclude the week with the final University of Michigan
consumer sentiment survey.
