Gold Technical Analysis – The Treasury Secretary pick weighs on the market

Fundamental
Overview

Gold saw a quick drop today
during the Asian session with the news of Scott Bessent nomination for Treasury
secretary as the most likely culprit. Bessent is a fiscal hawk, and the market
views him as a great pick for the job.

In fact, one of the main
reasons why the magnitude of the correlation between gold and real yields
weakened in the past couple of years was due to the US fiscal profligacy. This
has led to much stronger rallies in gold when real yields fell and more
contained selloffs when real yields rose.

In the bigger picture, gold
remains in a bullish trend as real yields will likely continue to fall amid the
Fed’s easing cycle, but the short-term corrections will be triggered by a
repricing in rate cuts expectations.

Overall, we might not see
the same strong uptrend in gold going forward as we got used to in the past
couple of years.

Gold
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that gold managed to rally into the 2720 level almost erasing completely
the Trump-led selloff. Today, we saw a quick drop during the Asian session on positive
US fiscal outlook. There’s not much else we can glean from this timeframe, so
we need to zoom in to see some more details.

Gold Technical Analysis
– 4 hour Timeframe

On the 4 hour chart, we can
see that we have a nice support zone around the 2643 level where we can also
find the 38.2% Fibonacci
retracement level for confluence.
This is where we can expect the buyers to step in with a defined risk below the
support 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 increase the bearish
bets into new lows.

Gold Technical Analysis
– 1 hour Timeframe

On the 1 hour chart, we can
see more clearly the recent price action with the quick drop overnight. The
price is now consolidating around the lower bound of the average daily range, so there might not be much left on
the downside for today.

Upcoming
Catalysts

Tomorrow we have the US Consumer Confidence report and the FOMC Meeting Minutes.
On Wednesday, we get the US PCE report and the latest US Jobless Claims
figures.

See the video below

This article was written by Giuseppe Dellamotta at www.forexlive.com.