The precious metal fell in overnight trading amid a setback to US-Iran developments to start the week. Traders were holding out some optimism with hope for both sides to sit down for talks in Pakistan today. However, that has fallen apart and there is still no firm timeline or agenda of when we will see Washington and Tehran officials meet.
That saw gold drop from near $4,780 to a low of $4,668 before catching a modest bounce since Asia trading today to hold closer to $4,765 currently.
While it still doesn't take away from the drop this week so far, the precious metal is at least showing some signs of life as traders continue to hang on to cautious optimism on US-Iran talks. That is also reflected in the broader risk mood, with European indices holding slight gains and S&P 500 futures seen up 0.6% on the day.
No talks are scheduled just yet with Iran remaining defiant that they will not come to the negotiating table so long as the US naval blockade holds. The hard line stance is consistent with their previous approaches to the conflict. However, it doesn't mean that they will not be open to proceed with further negotiations under the right circumstances.
In the past two weeks, gold prices are very much left in limbo as price action is trading in and around the 100-day moving average (red line) as well as the $4,800 level. That remains the case this week as well with the lows yesterday coinciding with dip buyers stepping in near the key technical level.
So, what's next?
It's still all on headline risks. The key question is when will see the US and Iran sit down again for the next round of talks. And while Iran might continue to grandstand on the matter, the big tell will be US vice president Vance's travel plans. He was supposed to go down to Pakistan last night or perhaps later today but reports are indicating that such plans have been put on hold. That as the US is struggling to get Iran to participate in talks for now.
So if and when we do see reports of movement from Vance, that should be the tell that both sides have agreed on something to work with in order to begin discussions again. As for the prospects of a deal, it very much remains up in the air.
And as such, the fate of gold prices is going to be tied to how all of this plays out. There will be some optimism when both sides meet again, with markets likely to want to price in a deal beforehand. So, that could help gold catch a pop higher before a potential setback if negotiations turn awry afterwards.
Clearing the recent swing highs around $4,858-70 on the daily chart will be a good first step to recover back the $5,000 mark potentially. But again, any gains will be subject to headline risks as the conflict continues to drag on for longer with the Strait of Hormuz still closed.
