FUNDAMENTAL
OVERVIEW
Gold is again on the backfoot as yet another rally on optimism gets faded. Tonight,
Iran’s IRGC launched a wave of ballistic missile attacks targeting US military
bases across the Gulf, including an Air Base in Kuwait. Iranian officials
described the strikes as retaliation for US actions against an oil tanker near
the Strait of Hormuz and military operations on Qeshm Island.
Bahrain, Saudi Arabia and the United Arab Emirates also reported attacks at
multiple facilities hosting US personnel. According to US Central Command,
American forces conducted “self-defense” operations, including
strikes on targets on Qeshm Island in response to attempted attacks by Iran.
The ceasefire continues to look weaker by the day but a full resumption of
the conflict seems unlikely. The negotiating deadlock has been dragging on for
a long time and oil prices are likely to remain persistently elevated until the
Strait of Hormuz is reopened.
This keeps increasing the risk of a hawkish Fed. More and more policymakers
are now pushing for dropping the easing bias, so we can expect that to happen
at the upcoming FOMC meeting. Moreover, if nothing changes on the Strait of
Hormuz side before then, we might get a hawkish surprise as inflation continues
to run hot and the US data remains resilient.
In the short-term, a resolution and the reopening of the Strait will likely
support gold on falling oil prices and increased rate cut bets. But if the
Strait remains closed for longer and oil prices stay elevated, the risk of the
Fed being forced to hike anyway increases, and that’s going to keep weighing on
gold.
GOLD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that gold is again consolidating as traders await new catalysts to push the
price into either direction. We are trading right in the middle of the two key
trendlines, so there’s not much we can glean from this timeframe. We need to
zoom in to see some more details.
GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME
On the 4 hour chart, we
have a key resistance zone around the 4,585 level where the price got rejected
from several times. From a risk management perspective, the sellers will have a
better risk to reward setup around the resistance and the downward trendline to
position for a drop into new lows. The buyers, on the other hand, will need the
price to break above the trendline to open the door for a rally into the 4,850
level next.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, we have
a minor downward trendline defining the current bearish momentum. The sellers
will likely continue to lean on the trendline to keep pushing into new lows,
while the buyers will look for a break higher to extend the pullback into the
4,490 zone. If the price pulls back into the zone, we can expect the sellers to
step in there with a defined risk above it to position for a drop into new
lows, while the buyers will look for a break to increase the bullish bets into
the 4,585 resistance. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today, we have the US
ADP report and the US ISM Services PMI. Tomorrow, we get the latest US Jobless
Claims figures. On Friday, we conclude the week with the US NFP report.
This article was written by Giuseppe Dellamotta at investinglive.com.