Gold Technical Analysis – The US stock market selloff weighs on gold

Fundamental Overview

Gold dropped yesterday following the weak US consumer confidence report. The main culprit for the weakness in gold was the selloff in the US stock market as it tightens financial conditions when it’s aggressive.

The problem here is that we got weaker economic data with increasing inflation expectations. The market might be fearing that in case we get a slowdown, the Fed might not be fast enough in cutting rates amid inflation remaining above target and uncomfortably high long-term inflation expectations.

This is the growth scare risk that was highlighted for some downside in gold given the overstretched long positions. The next NFP and CPI reports will be key for the market. Hot data, especially on the inflation side, will likely trigger a strong selloff in gold.

Gold Technical Analysis – Daily Timeframe

On the daily chart, we can see that gold pulled back from the all-time highs following the selloff in the US stock market. From a risk management perspective, the buyers will have a better risk to reward setup around the 2790 level, while the sellers will look for a break below the level to start targeting the 2600 level next.

Gold Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price bounced around the major upward trendline as the buyers stepped in with a defined risk below the trendline to position for a rally into new all-time highs. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 2790 level next.

Gold Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we have a resistance zone around the 2925 level. If the price gets there, we can expect the sellers to step in with a defined risk above the resistance to target a break below 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. The red lines define the average daily range for today

Upcoming Catalysts

Tomorrow we get the latest US Jobless Claims figures, while on Friday we conclude the week with the US PCE data.

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