Gold consolidates around the 1985 level

XAUUSD has been stuck in a consolidation around the key 1985 level for almost two weeks as the market got a bit overstretched following the Israel-Hamas war outbreak. The geopolitical risk seems to be waning as we haven’t seen any bigger escalation and the Hezbollah leader even distanced himself from the terrorist operation in Gaza.

On the macro side, real yields and the US Dollar fell recently following the weaker than expected labour market data. In contrast to the waning geopolitical risk, these are bullish drivers for Gold, so the precious metal finds itself in a tight spot. The technicals should help with the positioning and the risk management in this case.

Gold Technical Analysis – Daily Timeframe

On the daily chart, we can see that Gold went into a little bit of consolidation around the key 1985 level. From a risk management perspective, the buyers would have a better risk to reward setup around the 1950 support where they will also have the red 21 moving average for confluence.

Gold Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we had a divergence with the MACD right into the 1985 level. This is generally a sing of weakening momentum often followed by pullbacks or reversals. In this case, we are likely to see a pullback into the 1950 support. If the price breaks below the 1950 support, the sellers will increase the bearish bets to target the next support around the 1890 level.

Gold Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the price is rejecting the minor downward trendline as more aggressive sellers might try to position for a drop below the 1985 level and switch the bias from bullish to bearish. The buyers, on the other hand, will want to see the price breaking higher to gain more conviction and pile in to target a new high.

Upcoming Events

This week is pretty empty on the data front with just the US Jobless Claims on Thursday and the University of Michigan Consumer Sentiment on Friday. The market is likely to focus on the past week events and will be eager to see the US Jobless Claims on Thursday given the recent weakness in the labour market data. More weakness should support the upside for Gold, while stronger data is likely to lead to pullbacks.