continues to trade with a strong bullish bias supported by price stability above the psychological zone $3600, and any retracement towards this zone is witnessing buying intervention as macro factors have collaborated in support of Gold and against the .
After the recent record rally to $3675, prices cooled a little, retracing towards $3613, which saw strong buying reclaiming $3650 area. The 4-hour chart shows Gold has been trading within a broad ascending channel with continuous higher high – higher lows indicating a strong uptrend.
If bulls continue to dominate and break higher above $3675, expect extended upside aiming $3683-$3688, followed closely by $3693-$3698, above which $3705 will come into play.
Fundamental Drivers
Interest Rate Cut by Federal Reserve: Expectations of a 25 BPS interest rate cut now seem to have become a base case, which is widely being priced in and keeps Gold attraction intact. As the US labour market data indicated by Non-Farm Payrolls, Initial Jobless Claims have strengthened the possibilities of a rate cut by the Fed.
CPI Inflation Data & PPI Numbers: Rising US CPI inflation numbers indicate inflation remains sticky, as PPI has softened. This mixed message from data results supports demand for Gold as the Fed eases despite inflation, making Gold a more attractive bet as an inflation hedge.
Real Yields and Dollar Index Weakness: As Yields on US Treasury, especially real yields, which are nominal yields minus inflation, are under pressure, investor sentiments favour Gold. More so when the US dollar is fighting a tough challenge to reclaim 98 – 98.50, making the dollar-denominated Gold more attractive as holding cost goes down.
Safe haven demand, geopolitical crisis: Israeli air strikes on Qatar-based Hamas leadership have increased Middle East tensions and added a geopolitical crisis, bolstering safe haven demand for Gold.
Central Bank Buying: Central Banks around the world are reported to have increased Gold holdings in their forex reserves, which is supporting Gold demand globally.
Technical Drivers
Gold is in strong bullish momentum, and several breakouts above multiple resistance levels have all but confirmed the prevailing bullish trend.
RSI reading of 80 on the Daily time frame is on the edge of overbought territory, while the 4-hour time frame has shed its overbought conditions and has enough room for bullish extension.
The monthly RSI reading of 88 urges utmost caution about a significant correction in the near future.
Gold has confirmed a bullish breakout above a falling wedge and is retesting the support trendline, which is likely to be followed by resumed buying force towards immediate resistance $3658, above whichthe next hurdle is $3675, followed by $3685-$3695
Immediate support sits at $3635, followed by $3627
If this support zone is breached, look for a drop to the local demand zone $3610, below which the next support sits at 4-hourly 50 EMA -$3590
Overall Outlook
Strong bullish moves have witnessed smaller downward retracements. Also, the formation is bullish as seen by higher high – higher lows.
All the same, caution is essential on heights as a break with close below crucial support $3590 will pause the rally, shifting the momentum to short-term downward correction.
