It’s hysteria in the gold market as prices hit another record high: Is this justified?

FUNDAMENTAL
OVERVIEW

Gold extended the gains
into new record highs today following a strong selloff in the US Dollar on yen
intervention risks. The narratives underpinning gold continue to be
de-dollarisation, geopolitical tensions, and so on. Nothing new really.

I would say that this is
now more about FOMO rather than something fundamental. I’m not saying that the long-term
trend is over, but the current levels are not justified in the short-term. I
think we are at an inflection point and February could be the first major negative
month for precious metals if the right conditions fall in place.

This week, the focus will
be on the FOMC decision on Wednesday and the US jobs data on Tuesday and
Thursday. The biggest event could eventually be the new Fed chair announcement.
Betting markets now see BlackRock’s Rieder as the favourite. Rieder or Waller
would ease Fed independence risks and could weigh on precious metals.

The other major catalyst
could be the US NFP report next week. We’ve been seeing improvements in the US
Jobless Claims data that seem to suggest a pickup in labour market activity. A
strong report would trigger a hawkish repricing in interest rate expectations
and put pressure on gold. In case we don’t get the bearish catalysts, gold
could keep climbing just by inertia.

GOLD TECHNICAL
ANALYSIS – DAILY TIMEFRAME

On the daily chart, we can
see gold broke through the 5,000 level and extended the gains into new record highs.
We might have formed a channel, and the price is now trading right at the top
trendline. The sellers will likely step in around these levels with a defined
risk above the channel to position for a correction into the bottom trendline.
The buyers, on the other hand, will look for a break higher to increase the
bullish bets into new record highs.

GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME

On the 4 hour chart, we can
see that we have a minor upward trendline defining the bullish momentum on this
timeframe. The buyers will likely continue to lean on the trendline to keep
pushing into new record highs, while the sellers will look for a break lower to
pile in for a drop into the next trendline.

GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME

On the 1 hour chart, we can
see that the price is trading at the upper bound of the average daily range for today. In such instances, we
can generally see some consolidation or a pullback before the next move. More
aggressive sellers might look for a break below the minor swing level at 5050
to pile in for a pullback into the trendline.

UPCOMING CATALYSTS

Tomorrow we have the weekly US ADP jobs data and the US Consumer Confidence
report. On Wednesday, we have the FOMC policy announcement. On Thursday, we get
the latest US Jobless Claims figures. On Friday, we conclude the week with the
US PPI report.