00:01Yesterday, something interesting happened in gold, US inflation data or CPI came in
00:07at 3.4% over a year, exactly around expectation.
00:11Gold initially reacted positively and moved towards the 4,450 area, but something confusing
00:18happened.
00:19Gold pulled it back.
00:20Here is the question, if lower inflation is supposed to be good for gold, why did gold
00:25stop going up?
00:26And more importantly, how should a beginner understand this kind of market reaction?
00:31In this video, I am going to explain the fundamental story behind gold's move, and then at the
00:37end, I will connect it with technical analysis.
00:40No complicated economics, let's break it down.
00:44First, let's look at the CPI numbers.
00:46The July US CPI report showed 3.4% year-over-year, and core CPI came in around 2.5
00:54% year-over-year.
00:55The important thing is that, these numbers were broadly in line with expectations.
01:00Now if you are a beginner, you might think, inflation is cooling, great, gold should go
01:05up.
01:06And initially, that's pretty much what happened.
01:09Gold moved higher and approached the 4,450 area, reaching a roughly 2-month high.
01:14But here is where trading becomes interesting.
01:17The market doesn't simply look at and then decide.
01:22There are several steps in between, and understanding these steps is the real lesson.
01:28Let's bully a very simple chain.
01:31This is the connection I want beginners to understand.
01:35CPI is important, but CPI is not the final destination.
01:38The market is asking, what does this inflation number mean for the Federal Reserve?
01:44That's the real point.
01:45Let's imagine, inflation comes in softer than expected.
01:48For example, market expects 3.5%, actual 3.4%.
01:53That can make traders think, maybe inflation isn't getting worse, and that can reduce expectations
01:59for tighter monetary policy.
02:01If traders expect a less risk stick to Fed, Treasury yields can come under pressure, and
02:06the US dollar can weaken, and that can create a supportive environment for gold.
02:11So the simplified chain becomes.
02:15That's why gold initially reacted positively.
02:18Now comes the important part, the CPI number was not a huge surprise.
02:23It was basically in line with expectations, and this teaches us one of the most important
02:27lessons in trading.
02:29The market doesn't rate the number.
02:31The market rates the surprise and the change in expectations.
02:36Think about it like this.
02:38Suppose everyone expects you to score 80 marks, you score 80.
02:42Is everyone shocked?
02:44No.
02:44But if everyone expects 80, and you score 95, now there is a surprise.
02:51Financial markets work in a similar way.
02:55The number itself matters, but the difference between expected and the actual can matter
03:01even more.
03:02Now we get to the question that probably brought you to this video.
03:05Gold moved towards 4,450 level.
03:08Then pulled back.
03:10Why?
03:11Because markets continuously reassess expectations.
03:14The initial CPI reaction supported gold.
03:17But traders then had to look at the broader picture.
03:20What happened to Fed expectations?
03:22What happened to Treasury yields?
03:24What happened to US dollar?
03:27What happened with geopolitical risk?
03:29And these factors don't always point in exactly the same direction.
03:33Recent market commentary has also highlighted US-Iran tensions and dollar strength as factors
03:39in gold's current price environment.
03:41So gold isn't controlled by CPI alone.
03:44Here is another concept I want beginners to remember.
03:47Gold has multiple major drivers.
03:50These factors all support gold.
03:52That's when the move can become very strong.
03:55But sometimes they fight each other.
03:57For example, geopolitical tensions can increase safe haven demand for gold.
04:02But geopolitical tensions can also push oil prices higher.
04:06Higher oil prices can create inflation concerns.
04:09And higher inflation concerns can make traders expect interest rates to stay higher.
04:16So you can have geopolitical risk is bullish for gold.
04:20But at the same time, higher oil inputs, higher oil puts inflation.
04:26Higher oil, rising oil prices puts inflation risks higher.
04:32Resulting federal expectations higher puts pressure ultimately on gold.
04:37That's why the market can look confusing.
04:39Now we understand that fundamental picture behind gold and concluded that fundamentally gold
04:44is bullish.
04:45Let's move on to the technical chart.
04:47I am going to keep this very simple.
04:49We are going to analyze gold from three time frames.
04:52First daily, then 4 hour chart, after we analyze 1 hour chart.
04:57This helps us understand the bigger trend first and then move down to levels where traders
05:02may actually be interested.
05:04Let's start with the daily chart.
05:06This is gold daily chart.
05:07Here I am going to switch from normal candlestick chart to high currency chart.
05:12Why?
05:13Because high currency can help us reduce some of the short term price noise and make the
05:18overall trend easier to visualize.
05:20It doesn't change the actual market structure or price levels.
05:23So I am using it here mainly to make the trend easier to see.
05:27Now, look at the gold's previous price action.
05:31Gold made an all time high around the Pythogen 600 level.
05:35But after that high, the market started moving lower.
05:38We can clearly identify lower low followed by lower high and again lower low.
05:45This is a classic bearish market structure.
05:49So, for a long period, the daily chart was telling us gold is in a bearish trend.
05:55But now, something interesting has happened.
06:00Let's focus on the most recent major swing high.
06:03That swing high is around the 4380 level.
06:08Now, look carefully.
06:10Price came back up, tested this area and then broke above the 4380 swing high.
06:18More importantly, we can see a high canacy candle closing above this previous swing high area.
06:25And this is important because we are no longer looking at just a random bullish candle.
06:31We are looking at a potential change in market structure.
06:35In simple terms, we can say the market was making lower highs, lower lows.
06:41But now price has broken a previous important lower high area.
06:45That can indicate a potential change of character or an early sign that the bearish trend is losing control.
06:54So, on daily time frame, I would say gold is potentially transitioning from bearish to bullish.
07:02But remember, a single breakout doesn't guarantee a new long term uptrend.
07:07We still need confirmation from the lower time frames and most importantly,
07:11we need to see whether important support levels hold.
07:15And that's exactly why we are moving to the H4 chart.
07:19Now let's move to the 4 hour chart.
07:21And here is the picture becomes much cleaner.
07:24Look at the structure.
07:25We are seeing higher highs and higher lows.
07:29That's a bullish market structure.
07:31So while the daily chart is showing us a potential transition,
07:35the H4 chart is already giving us a much cleaner bullish structure.
07:39Now let's identify the most recent important swing low.
07:43That area is around 4223 level.
07:48This level is very important for our bullish thesis.
07:51Why?
07:52Because as long as price continues to hold above this important swing low,
07:56the 4 hour chart, the H4 bullish structure remains intact.
08:01Think about it this way.
08:03If price continues to make higher highs, higher lows, and then higher highs, higher lows,
08:09buyers are still controlling the structure.
08:12But if price eventually breaks below that important H4 swing low, then we have to reconsider the bullish
08:19view.
08:20So right now, 4 hour chart is bullish.
08:23And our key question is, does price continue to hold above the important swing low?
08:28At the moment, the structure has not been broken.
08:33Now let's move down to the 1 hour chart.
08:36This is where I wanted to identify potential support zones.
08:39And here is an important rule.
08:41If market is in an uptrend, I am not immediately looking for resistance and short trades.
08:47I am primarily interested in where can buyers potentially steps in.
08:52Looking at 1 hour chart, we can see a strong bullish move.
08:55Price has been creating higher highs and higher lows.
08:59So again, the short term structure is bullish.
09:02Now let's mark our first important support zone.
09:06The first support zone is located at 4310 to 4350 level.
09:13This is an area I am watching because of the previous price action and structure.
09:18If price pulls back into this zone and the bullish structure remains intact, we can watch
09:24for a potential reaction.
09:26But remember, a support zone is not a guarantee that price will bounce.
09:31We wanted to see confirmation first.
09:33Let's look at the second support zone, which is located at H4 swing low, 4230 to 4270 level.
09:41The second zone is more important from the higher timeframe structure.
09:46So our technical bias is bullish.
09:49But there is one important thing.
09:52Gold is currently pulling back.
09:54And a pullback doesn't automatically mean the trend has reversed.
09:58Sometimes markets simply need to take a break.
10:01After a strong bullish move, some traders may take profits.
10:05That creates a temporary decline in price.
10:08So right now, I would describe the current move as potential profit taking, rather than
10:14calling it as a major bearish reversal.
10:16What would change my view?
10:18This is probably the most important part of the analysis.
10:21I don't want to say gold is definitely going up.
10:25Instead, let's define what would make me change my bullish wave.
10:29If price pulls back and holds the 4310 to 4350 support zone and bullish structure remains intact, then the bullish
10:38scenario remains valid.
10:40But if price breaks that area, I don't immediately panic.
10:44I would look at the next major support, located at 4232 to 4270 level.
10:51That's where the H4 chart becomes much more important.
10:55If price eventually breaks below the major H4 swing law, around at 4223 level, then the bullish structure would be
11:03seriously weakened.
11:04At that point, I would reassess the entire bullish thesis.
11:08So let's put everything together.
11:10From a fundamental perspective, we are currently bullish on gold, with the market closely watching
11:16inflation, Fed expectations, and the US dollar, yields, and geopolitical developments.
11:23And from a technical perspective, we are also bullish.
11:26The daily chart is showing a potential change from bearish to bullish.
11:31The fourth chart is making higher highs and higher lows.
11:34And the 1 hour chart is also in bullish structure, with our key support zones at 4310 to 4350 level,
11:42and the second one is 4230 to 4270 level.
11:47Right now, fundamentally bullish, technically bullish.
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