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FUNDAMENTAL
OVERVIEW
Gold probed below
the key $4,300 support this week but hasn’t confirmed the breakout, as the
price got stuck in a consolidation. This morning, we are seeing some bids, but
it could be just noise ahead of the FOMC
decision later today.
The decision could
trigger big moves, especially if we get deviations from the expectations. The
consensus is for the Fed to hike by 25 bps, with potentially one or two dissenters
voting for a hold. At this meeting, we get the Summary of Economic Projections
(SEP) and the Dot Plot.
Traders will be focused
on the latter where the Fed is expected to project two more rate hikes, one in
2026 and one in 2027. This would still be below the current market pricing of
three more rate hikes by the end of 2027. Fed Chair Warsh is not expected to offer
much in terms of forward guidance but just repeat his Jackson
Hole message.
If the Fed signals
three or more further hikes, that would likely be taken as a hawkish surprise
and weigh on gold. Conversely, a forecast suggesting just one or two more rate
hikes could be taken as dovish and could give gold a boost.
The other major
focus will be developments in the Middle East, as oil prices continue to trade
above $100 level and fuel inflation concerns amid worsening disruptions. Oil
prices have been the key driver of markets recently, so any de-escalation in
the Middle East could push oil prices lower and lead to a dovish repricing, which
could ultimately support gold.
For now, I think
the fundamentals point to further downside for gold as we would need a
de-escalation in the Middle East or a dovish Fed to change the picture.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see gold rebounded yesterday as the price rose back above the key 4,300 support.
The buyers will likely continue to step in around these levels with a defined
risk below the support to position for a rally into the 4,890 level. The
sellers, on the other hand, will want to see the price breaking below the
support to pile in for a drop into the 3,885 level next.
GOLD
TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we
have a downward trendline defining the bearish structure. If we get a pullback
into the trendline, we can expect the sellers to lean on it with a defined risk
above it to position for a drop into the 3,885 level. The buyers, on the other
hand, will look for a break higher to increase the bullish bets into the 4,890
level next, with the 4,510 level as the first target.
GOLD
TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we
have a minor downward trendline acting as resistance. The sellers will likely step
in around the trendline with a defined risk above it to keep pushing into new
lows. The buyers, on the other hand, will look for a break to extend the rally
into the next trendline. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today, we have the
FOMC rate decision. Tomorrow, we get the US Jobless Claims figures. Traders
will also keep a close eye on developments in the Middle East.
This article was written by Giuseppe Dellamotta at investinglive.com.
