Basic Overview
Ultimately, the collapse in global markets on Monday has been a stressor for gold. The reasons for this decline lie in the movement of real yields and liquidation due to the need for cash in extreme scenarios. In the big picture, real yields fall, which is good for gold, but in extreme cases when inflation expectations fall faster than nominal yields, real yields can rise and hurt gold.
This is what happened in the last two recessions. Typically, a sell-off in the stock market, like we saw on Monday, triggers such dynamics. Things have stabilized since then, and now the market is consolidating around a support area.
Technical Analysis of Gold – Daily Time Frame
Gold daily
On the daily chart, we can see that gold is now trading in a narrower range between the support level of 2360 and the resistance level of 2430. We can expect buyers to step in around the support level to move towards new highs. On the other hand, sellers will want to see the price drop to increase bearish bets towards the support level of 2277.
Gold Technical Analysis – 4 Hour Time Frame
Gold 4 hours
On the 4-hour chart, we can see that the price has recently broken the uptrend line and we saw a quick move to the downside as sellers piled in and buyers pulled back. We now have a downtrend line that defines the current bearish momentum.
Buyers will want to see the price move higher in order to enter an uptrend towards the high of 2483. On the other hand, sellers are likely to continue relying on the trend line to pave the way for a break of the 2360 support area.
Technical Analysis of Gold – 1 Hour Time Frame
gold 1 hour
On the 1-hour chart, we can see that the price is currently testing the trend line. What happens here will likely determine where the price will go in the coming days. A breakout to the upside should lead to new highs, while a strong rejection should lead to a drop to the 2350 level afterwards. The red lines mark the average daily range for the day.
Upcoming incentives
This week is essentially data-free. The main event will be the release of US unemployment claims tomorrow. The market will also pay close attention to the comments of the Fed members due to the latest developments in the markets and economic data.
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