FUNDAMENTAL OVERVIEW
Gold plunged yesterday after breaking out of its recent consolidation range. The move gained momentum following news of an Israeli strike on Iran’s South Pars gas field. In the days leading up to this, Iran had warned it would respond if its energy infrastructure were targeted.
The attack marked a clear escalation for markets and triggered the familiar reaction we’ve seen since the start of the conflict: gold, stocks, and bonds moved lower, while the US dollar and oil rallied.
Shortly after, gold faced another headwind when US PPI data came in much stronger than expected, prompting a more hawkish repricing of interest rate expectations. Prices fell to new lows before consolidating ahead of the FOMC decision.
However, the selloff resumed after the Fed. While policymakers left rates unchanged as expected, Fed Chair Powell struck a more hawkish tone. He emphasized inflation risks, noted discussions around two-sided risks to rates, and even acknowledged that the possibility of the next move being a rate hike did come up.
For now, tighter financial conditions and the hawkish repricing are weighing on gold. This pressure is likely to persist unless we see a clear de-escalation in tensions between the US and Iran.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that gold eventually broke out of the consolidation above the 5,000 level and it’s now approaching the major trendline around the 4,650 level. This is where we can expect the buyers to step in with a defined risk below the trendline to position for a rally into new all-time highs. The sellers, on the other hand, will look for a break lower to increase the bearish bets into the 4,400 level next.
GOLD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see that the price has been consolidating around the 5,000 support in the past couple of days and as soon as the price broke through the recent lows, the bearish momentum increased as more sellers pile in. If we get a pullback from the major upward trendline, we can expect the sellers to lean on the downward trendline with a defined risk above it to position for a drop back into the major trendline targeting a breakout. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new highs.
GOLD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we have a minor downward trendline defining the bearish momentum on this timeframe. If we get a pullback, we can expect the sellers to lean on the trendline with a defined risk above it to keep pushing into new lows, while the buyers will look for a break higher to increase the bullish bets into the next trendline. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we get the latest US Jobless Claims figures. The focus remains on the US-Iran war, so keep an eye on the headlines.
