Gold falls back after strong jobs data boosts rate hike bets; CPI in focus

FUNDAMENTAL OVERVIEW

Gold moved sharply lower on Friday following the US NFP report, which revealed that August job creation nearly tripled the market projection of 56K. The decline proved short-lived, however, as the majority of the NFP-triggered moves were subsequently reversed.

The reason for this was that market participants were concentrating on the CPI rather than the NFP data. Traders focus on the metrics the central bank monitors, and the Federal Reserve is currently keeping an eye on inflation.

Indeed, the day before the NFP release, Fed Governor Waller stated he would back leaving rates unchanged at the coming FOMC meeting, but a high CPI reading would prompt him to contemplate a rate increase.

This week centres on the US CPI figures. Unless there is an unforeseen development in US-Iran ties, gold price action is expected to remain mostly within a range or slightly negative, as traders may start positioning ahead of the CPI release.

A CPI report that is soft or in line with expectations is likely to lift gold, given that Fed’s Waller indicated he would not consider a rate hike unless the CPI comes in hot. On the flip side, a higher-than-expected core monthly inflation figure would probably cause another gold selloff as markets reprice more hawkishly.

GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME

On the daily chart, a support zone exists near the 4,311 level. Should the price fall back into that support area, buyers are anticipated to enter with a clearly defined risk beneath support, aiming for a climb to the 4,890 level. Sellers, in contrast, want to see the price break lower so they can add to short positions for a drop toward the 3,885 level next.

GOLD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME

On the 4-hour chart, a downward trendline outlines the recent bearish pattern. If a pullback reaches that trendline, sellers are expected to act on it with a clearly defined risk above it, continuing to drive prices to new lows. Buyers, however, will seek a breakout higher to boost bullish bets toward the 4,890 level next.

GOLD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME

On the 1-hour chart, a minor resistance zone sits near the 4,450 level. If the price reaches there, sellers are likely to intervene with a clearly defined risk above resistance to keep pushing to new lows. Buyers, meanwhile, will look for a break to extend the pullback toward the trendline. The red lines mark the average daily range for today.

UPCOMING CATALYSTS

On Thursday, the US PPI report and US Jobless Claims data are due. On Friday, the week concludes with the US CPI report.