Gold's Double Top Pattern Emerging!

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Gold is currently trading at $4288. Gold experienced a sharp rise and fall on Monday, briefly approaching the psychological high of $4350 due to market expectations of a Federal Reserve rate cut and fluctuations in the US dollar exchange rate. This nearly touched the more than seven-week high reached last Friday. However, as safe-haven demand cooled rapidly, gold quickly gave back most of its gains, ultimately closing at $4304.91, a slight increase of only about 0.1%. The main driver of this change was the progress made in important talks between US officials and Ukrainian President Zelensky regarding ending the war, which significantly reduced market demand for safe-haven assets. Meanwhile, global traders are turning their attention to the upcoming key US employment data, which will further reveal the Fed's future monetary policy path.

The long wait is finally over. The US Bureau of Labor Statistics will release its November and October non-farm payroll reports in just over an hour. Traders are now closely awaiting the US non-farm payroll report and retail sales data scheduled for release on Tuesday, which will provide more clues about the Fed's policy path. This report will also have a significant impact on expectations for Fed rate cuts next year. Currently, the market expects two more rate cuts before September next year, while the Fed only expects one. If last month's employment data is stronger than expected, market expectations may align with the Fed's. If this happens, the dollar index may rise back to around 99.30, the 200-day simple moving average, and cyclical stocks may come under pressure. This could also push gold prices back to the record high of October, as it could indicate that the Fed's 75 basis point rate cuts since September were too rapid. If November's employment data is stronger than expected, gold prices may see a pullback. In addition to the non-farm payroll data, today's trading session will also see the release of the US October retail sales month-on-month rate (commonly known as "the terror data"), the US October industrial production month-on-month rate, and the US December SPGI manufacturing PMI preliminary value, which investors should pay attention to. Additionally, news related to the Venezuelan geopolitical situation should be monitored. Overall, the progress of the Ukraine peace talks has brought short-term pressure to the global gold market, and the weakening of safe-haven demand has led to a narrowing of gold price gains, but the release of the US employment data will be the next key turning point. Strong data could further boost the dollar and suppress gold prices; conversely, weak data could reignite expectations of interest rate cuts, driving a gold price rebound. Investors need to closely monitor the interaction between geopolitical developments and economic indicators to seize market opportunities. In the current environment of uncertainty, gold will continue to play its role as a safe-haven asset, but short-term volatility cannot be ignored.

Gold Price Trend Analysis:

After fluctuating wildly in the US session yesterday, gold continued to trade in a range. The European session's rise failed to break the historical high, and with the non-farm payroll data release today, significant gains are unlikely, with a low probability of breaking the previous high. Range-bound trading is the most probable scenario. Continue to be cautious of a pullback after a surge in gold prices; avoid chasing highs. The Asian morning session continued yesterday's US session trend, weakening further. Therefore, the market is likely to see a greater pullback, and a test of 4265 is probable today, with the key support level at 4258, the low of the large bullish candle.

Gold is showing early signs of a double top on the 1-hour chart. If today's rebound is weak and breaks below the 4285 support level, the double top pattern will be confirmed. Furthermore, the current hourly chart shows short-term consolidation, requiring close monitoring. The price's lack of upward movement suggests a potential reversal and a sharp, high-volume decline. In terms of trading strategy, with data releases today, a double top formation at 4353 is possible. The hourly chart is currently consolidating at low levels, but there's been little upward momentum or follow-through. Be aware of a potential minor correction followed by a second decline. Short-term volatility is high; consider shorting near the 4320 resistance level in the early morning. In summary, Jin Shengfu's short-term trading strategy for gold is primarily to sell on rallies, with buying on dips as a secondary approach. Key resistance levels to watch are 4320-4330, and key support levels are 4260-4250. Please follow the trading recommendations closely.

[Nahid Hossen]

This double top setup looks concerning for gold bulls.