FUNDAMENTAL OVERVIEW
Gold has been consolidating since Thursday’s selloff when Trump disappointed the market in his address to the nation by maintaining the hawkish stance towards Iran and reiterating the 2–3 week timeline for ending the war.
We haven’t got any meaningful development in the meantime, although Trump set a “final” deadline for Iran to reopen the Strait of Hormuz which expires today at 8 pm ET. He threatened to demolish and take Iran out in “one night” if no deal is reached before the deadline.
This has been keeping the markets on the defensive and led to rangebound price action pretty much across the board. Looking ahead, gold’s fate depends on the US-Iran war because of its link with financial conditions.
For now, the bearish bias remains intact, and we could see gold falling into the 4,000 level if the conflict drags on. An escalation will likely put much more downward pressure on prices, while a de-escalation should trigger another relief rally and take us towards the 5,000 handle.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that gold is consolidating around the downward trendline. This is where the sellers are stepping in with a defined risk above the trendline to position for a drop into the major trendline around the 4,000 level. The buyers, on the other hand, will look for a break to pile in for a rally into the 5,000 level next.
GOLD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see the price broke below the upward trendline that was defining the pullback into the major downward trendline. The sellers will likely continue to pile in around these levels with a defined risk above the downward trendline, while the buyers will look for a break higher to open the door for new highs.
GOLD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see more clearly the rangebound price action around the downward trendline. This pullback might be forming a triple top or a head and shoulders pattern with the neckline around the 4,620 level. If we get a break lower, we can expect the sellers to increase the bearish bets into new lows. The red lines define the average daily range for today.
UPCOMING CATALYSTS
On Wednesday we have the FOMC minutes. On Thursday, we get the US PCE price index and the latest US Jobless Claims figures. On Friday, we conclude the week with the US CPI report and the University of Michigan Consumer Sentiment survey. It goes without saying that the focus remains on the US-Iran headlines, so keep an eye out for any new development.
