Fundamental
Overview

The global stock market
rout didn’t spare gold as the precious metal fell alongside equities although on
a much lesser scale. There’s a common misconception with gold. People think
it’s a safe haven in crises times. But history suggests otherwise. If you look
back at the most recent recessions, you will notice that gold sold off
alongside the stock market. It’s not a protection against a market selloff.

When there’s a tightening
in financial conditions stemming from an aggressive stock market selloff,
widening credit spreads and recessionary fears, then all correlations go to
one. The best times for gold is when the central bank cuts interest rates and
the market prices in better growth ahead.

But the absolute best time
though is during stagflationary expectations which we had in the past weeks and
months. Those expectations got crushed by the tariffs announcement as it was so
bad that the expectations switched to price in a recession.

We are now having a
tightening in financial conditions and this is going to weigh both on growth
and inflation despite the expectations of more inflation from tariffs. In fact,
market-based inflation expectations are going down now.

The risk of more inflation
could come only if the central banks start to ease aggressively and the current
tariffs remain in place, in which case, gold will rally hard. Conversely, if the
central banks don’t ease fast and the markets continue to sell off, then we
will just get a recession and potentially deflation which is a byproduct of
such crises and in this case, gold will collapse.

Of course, this doesn’t take in consideration what happens with tariffs but an easing in fears and de-escalation should give gold a boost, while further escalation is likely to weigh more on the precious metal as it would increase recessionary fears.

Gold
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that pulled all the way back to the major trendline around the 2957 level. This
is where the buyers piled in with a defined risk below the trendline to
position for a rally into new all-time highs. The sellers, on the other hand,
will want to see the price breaking lower to increase the bearish bets into the
2832 level next.

Gold Technical Analysis
– 4 hour Timeframe

On the 4 hour chart, we can
see that we have also a key resistance
around the 3057 level. From a risk management perspective, the sellers will
have a better risk to reward setup around the resistance to target a break
below the trendline. The buyers, on the other hand, will want to see the price
breaking above the resistance to increase the bullish bets into new highs.

Gold Technical Analysis
– 1 hour Timeframe

On the 1 hour chart, there’s
not much we can add here as we could remain stuck in a range between the 2957
support and the 3057 resistance. Nonetheless, the market participants will likely
lean on the levels to position for the opposite moves and increase the bets on
breakouts. The red lines define the average daily range for today.

Upcoming
Catalysts

This week is all about tariffs news ahead of tomorrow’s
deadline, so the data won’t matter much. Nevertheless, we will get a couple of
notable data releases. On Thursday, we get the US CPI report and the latest US
Jobless Claims figures, while on Friday we conclude the week with the US PPI
and the University of Michigan Consumer Sentiment survey.

Watch the video below