KEY POINTS:
- Gold rallied overnight on geopolitical news
- US NFP report on Friday a key risk event
- Big picture trend remains skewed to the upside
- Trendline around the 4230 level could act as strong support
FUNDAMENTAL
OVERVIEW
Gold has been supported
recently by the soft US NFP
and CPI
reports before the Christmas holidays. That helped to push the precious metals
into new all-time highs before a quick selloff brought prices back to the original levels.
Today, gold saw some upside overnight on geopolitical news . In fact, the US President Trump escalated rhetoric across Latin America, reinforcing Washington’s assertion of control over post-Maduro Venezuela while openly signalling that Colombia and Mexico could also face US action as part of a widening campaign against criminal networks and regional instability.
This week we have the
December NFP report coming up, and while the previous report might have been
taken with a pinch of salt due to shutdown related issues, this one should give
us a clearer picture. Strong data might lead to a correction, while soft figures should keep on supporting the upside.
In the bigger picture, gold
should remain in an uptrend as real yields will likely continue to fall amid
the Fed’s dovish reaction function. But in the short term, a hawkish repricing
in interest rate expectations could weigh on the market.
GOLD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
Gold – daily
On the daily chart, we can
see that gold pushed into a new all-time high during the Christmas week but
eventually erased all the gains. From a risk management perspective, the buyers
will have a better risk to reward setup around the trendline to position for a
rally into a new all-time high. The sellers, on the other hand, will want to
see the price breaking lower to pile in for a drop into the 3887 level next.
GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME
Gold – 4 hour
On the 4 hour chart, we can
see that we have a minor resistance zone around the 4440 level. This is where
we can expect the sellers to step in with a defined risk above the resistance
to position for a drop into the major trendline. The buyers, on the other hand,
will look for a break higher to increase the bullish bets into new all-time
highs.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
Gold – 1 hour
On the 1 hour chart, we can
see that we have the upper bound of the average daily range for today standing right around
the resistance. This suggests that it’s unlikely that we will see a sustained
breakout today, so there’s a good chance that we either consolidate here or
pull back into the minor trendline.
We will likely find
dip-buyers around the minor trendline targeting a break above the resistance,
while the sellers will look for a break below the trendline to increase the
bearish bets into the major trendline.
UPCOMING CATALYSTS
Today we get the US ISM Manufacturing PMI. On Wednesday, we have the US ADP,
the US ISM Services PMI and the US Job Openings data. On Thursday, we get the
latest US Jobless Claims figures. On Friday, we conclude the week with the US
NFP report.
