FUNDAMENTAL OVERVIEW
Gold has given back all the gains it made during the US–Iran-driven rally, which might seem surprising at first. But this kind of move isn’t unusual. In periods of intense risk aversion, gold often falls alongside equities as financial conditions tighten, and traders are forced to deleverage to meet margin calls.
It looks like the worst of the panic is behind us, and gold has started to gradually recover some of those losses. At the same time, the US–Iran conflict is pushing energy prices higher, which is feeding into rising inflation expectations. As long as tensions persist, that backdrop should continue to provide support for gold.
The main downside risk for gold would be a de-escalation. That would likely trigger another selloff, as the market shifts its focus back to economic data, which has been showing clear strength. We also have the NFP report on Friday. If tensions ease before then and the jobs data comes in strong, it could be a double whammy for gold.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that gold erased all the gains from the US-Iran led rally and bounced around the 5,000 level as dip-buyers stepped in. There’s not much we can glean from this timeframe, so 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 probed below the key support zone around the 5,100 level but eventually bounced back above it. We can expect the buyers to continue to step in around the support with a defined risk below it to keep pushing into new highs. The sellers, on the other hand, will look for another break to pile in for a drop into the 4,600 level next.
GOLD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see that we have a downward trendline defining the recent pullback and a resistance zone around the 5,250 level. If the price gets there, we can expect the sellers to step in with a defined risk above the trendline to position for a break below the 5,100 support. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new highs. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we have the US ADP 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. The market focus remains on the US-Iran war, so the data might not matter much.
