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Gold has been ranging for quite some time.

GOLD Daily Chart Setup

Gold has been ranging for quite some time. As we have discussed many times already, my expectation for the short term is that gold will drop for a major retracement. I am bullish on gold since October 2022, but I also pointed out multiple times that a drop in price at the overbought market is always possible, which is a trading opportunity to short for shorter-term, before the longer-term long. 

Let’ have a look at the Daily chart below: 

Let’s keep it simple. The price has reached all-time high levels (even created a new all-time high) and started to decline. When we don’t have short-term fundamental support around all-time high levels, that is often used as a profit-taking zone. Well, we don’t have very big bullish cases for gold at the highs to believe gold will break out and hit big all-time high levels overall. So, we go with the second scenario, which is the profit-taking one. 

What we notice watching the price is that bulls have problems moving the price higher, but so for the bears. There are not lots of profit takers, as well as lots of short-sellers seems like. The price found its equilibrium zone, where the supply is well meeting the demand.

We know that changes in the major trend are always difficult and there’s a phase ot distribution where the battle between buyers and seller is big. I still believe that the price will drop, based on my price analysis and not much fundamental factors to say vice-versa. 

Fed is re-directing us traders and investors to keep an eye on the economic data and the economic data is currently: 

NONFARM PAYROLLS UNITED STATES USD – POSITIVE means potential hawkish fed

LAST RELEASE 

  • 253KActual
  • 179KConsensus
  • 165K Previous

CPI UNITED STATES USD
Higher CPI means potential hawkish fed
lower CPI means potentially less hawkish or dovish fed

LAST RELEASE 

  • 4.9%Actual
  • 5.00%
    Consensus
  • 5.00% Previous

You can check the CPI basket breakdown below:

Another inflatio measurement Producers Price Index (PPI) was released yesterday and it also came hot. yes, it was less than expected, but still way higher than the previous month. PPI is mostly used as a leading indicator to forecast future CPI. And if PPI is rising it is probably a matter of time we see slight jump is CPI numbers in the near future. Market may take it as negative note, which is USD supportive short-term. 

PPI UNITED STATES USD – higher means potentially more hawkish fed

LAST RELEASE 

  • 0.2%Actual
  • 0.3%Consensus
  • -0.4%
    Previous

Average hourly earnings is another indicator that the data released last week, and it is still at a pro-inflationary level in its nominal numbers. I disagree overall with most of the data taken just with nominal numbers, but if we have to compare short-term data and the tendency, then we must think like short-term markets. And that green numbers here equals more spending and more upcoming inflation. That also increases the fear of the hawkish Fed.  

Average hourly earnings m/m UNITED STATES USD higher data is pro-inflationary

LAST RELEASE 

  • 0.5%Actual
  • 0.3%Consensus
  • 0.3% Previous

Technical indicators and the Price Action suggest that the price of Gold must drop based on my opinion, and so for short-term data, we get from the economic calendar. Pro-inflationary data equals a more hawkish Fed, equals fear among investors and a flight to the safe-haven USD. 

With the all above, the conclusion we can make is that my short-term bias or view is more bearish than bullish. 

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