Gold erases most of the Treasury-led gains as Fed Chair Warsh retightens financial conditions
FUNDAMENTAL OVERVIEW
Gold sold off on Friday after Fed Chair Warsh delivered a hawkish speech at the Jackson Hole Symposium.
The key passage was him saying "I would be hard pressed to describe broad financial conditions as restrictive". The market interpreted that as him leaning against the recent easing in financial conditions and, therefore, retightened them.
This process has, of course, extended the corrections in the "debasement" trades, with gold basically returning to pre-US Treasury announcement levels. The rate hike probabilities for the September meeting have also increased, with the market now seeing roughly a 60% chance of a hike.
Warsh has also reiterated that the Fed is focused solely on inflation now and mentioned that the progress has been slow. For this reason, I think only a soft US CPI report could bring the probabilities below 50% and deter the Fed from hiking at the upcoming meeting.
If the probabilities stay at or above 50%, the Fed might be forced to hike regardless because failure to do so would send a dovish message and ease financial conditions again.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that Warsh’s hawkish speech triggered a selloff as financial conditions retightened. The next key support should be around the 4,311 level where we have also the major broken trendline for confluence. If the price gets there, we can expect the buyers to step in with a defined risk below the support to position for a rally into the 4,890 level. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 3,885 level next.
GOLD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see the price fell below the upward trendline and extended the drop as more sellers piled in on the breakout. There’s not much we can glean from this timeframe, so we need to zoom in to see some more details.
GOLD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see the bearish momentum waned a bit and we now have a swing high around the 4,475 level that could act as minor resistance. If the price pulls back into the swing high, we can expect the sellers to step in with a defined risk above the resistance to keep targeting the 4,311 level. The buyers, on the other hand, will look for a break to pile in for a rally into the 4,550 level next. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow, we have the US ISM Manufacturing PMI and the US Job Openings data. On Wednesday, we get the US ADP report. On Thursday, we have Fed’s Waller, the US Jobless Claims and the US ISM Services PMI. On Friday, we conclude the week with the US NFP report.
This article was written by Giuseppe Dellamotta at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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