Gold approaches record highs ahead of key US data: here’s how it’s likely to react

KEY POINTS:

• Gold remains supported amid the Fed’s dovish reaction function
• Short-term direction to be decided by the key US data this week
• Strong data likely to put pressure on gold, weak data to support it

FUNDAMENTAL
OVERVIEW

Gold has been supported
recently by the more dovish than expected Fed Chair Powell’s tone at the FOMC
press conference.

He downplayed the inflation
risk and emphasized the labour market weakness, suggesting that there’s more
tolerance for higher inflation than for weaker labour market.

This week is all about the
US NFP and CPI reports. Right now, the market is pricing 57 bps of easing by
the end of 2026.

If we get strong US data,
especially on the labour market side, we will likely see a hawkish repricing and
a selloff in gold. On the other hand, weak data should support the precious
metal further as the market will bring rate cut bets forward.

In the bigger picture, gold
should remain in an uptrend as real yields will likely continue to fall amid
the Fed’s dovish reaction function. But in the short term, a further hawkish
repricing in interest rate expectations should weigh on the market.

GOLD TECHNICAL
ANALYSIS – DAILY TIMEFRAME

On the daily chart, we can
see that gold continues to push into new highs after breaking above the 4245
level. The natural target should be the all-time high around the 4381 level.

If the price gets there, we can expect the
sellers to step in around the all-time high with a defined risk above it to
position for a drop back into the 3887 level.

The buyers, on the other
hand, will want to see the price breaking higher to increase the bullish bets
into new all-time highs.

GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME

On the 4 hour chart, we can
see that we got a quick retest of the previous highs around the 4256 level on
Friday. The buyers stepped in around those levels with a defined risk below the
4245 level to keep pushing into the all-time high.

The sellers, on the other
hand, will better off waiting for the price to come into the all-time highs or
break below the 4245 level before piling back in with conviction.

GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME

On the 1 hour chart, we can
see that we have the upper bound of the average daily range for today standing right near
the all-time highs.

This suggests that it’s
unlikely that we will see a sustained breakout today, so if the price rallies
into the all-time highs, we can expect the sellers to pile in to position for a
drop back into the 4245 level.

At this point though, it
would be better to wait for the US NFP report tomorrow as it’s expected to trigger
big moves.

UPCOMING CATALYSTS

Tomorrow we have the US NFP report. On Thursday, we get the US CPI data.