FUNDAMENTAL OVERVIEW
Gold rebounded in the final part of last week on hopes that Iran would accept the US war-ending proposal after Axios reported the two parties were getting close to a one-page memo and that US officials were expecting Iran's response to several key points in the following 48 hours. That was preceded by Trump pausing Project Freedom which was interpreted as another step towards a deal.
Unfortunately, both Trump and Iran rejected the respective proposals calling them unacceptable and leaving the two sides miles apart on any potential agreement. Moreover, Israeli PM Netanyahu confirmed that the removal of Iranian nuclear material remains an active war priority, and separate reports indicated that Trump told Netanyahu directly he wants to go in on Iranian nuclear sites.
This kind of headline noise has been going on for several weeks and kept the markets in rangebound mode as traders continued to wait for new developments before picking a direction. The unlimited ceasefire is acting as a floor, while the tensions and lack of breakthrough as a ceiling.
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 as inflation worries would ease. On the other hand, if the war restarts, we can expect gold prices to quickly fall back to March lows.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that gold rebounded in the final part of last week on hopes that Iran would accept the US war-ending proposal. Unfortunately, that hasn’t happened and we got a little pullback. The price is still 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 can see the price is bouncing on the key 4,650 support zone. This is where we can expect the buyers to step in with a defined risk below the support to position for a rally back into the 4,890 level. The sellers, on the other hand, will look for a break lower to pile in for a drop into the 4,350 level next.
GOLD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, the recent price action might have formed a bullish flag, but we will need a break above the top trendline to confirm it. For now, the buyers will likely continue to pile in around the support and target a breakout to the upside, while the sellers will wait for a break below the support or a rejection around the top trendline. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow we get the US CPI report. On Wednesday, we have the US PPI data. On Thursday, we get the US Retail Sales report and the latest US Jobless Claims figures.
