Gold triggers stops above the 2019 high, up by ~4% since the turn of the year
There's still no stopping the run higher in gold as everything continues to fall into the right place for the commodity to start the new year. We've talked about it from a technical perspective in late December before alluding to the ever-consistent January seasonality.
Add to the fact that we have US-Iran tensions that is gripping markets and you have a dangerous cocktail combo for gold to keep higher since Friday.
Gold is up by nearly 1.5% at the moment but buyers have seen gains pared a little after hitting a high of $1,588.13 earlier in the day. So, what's next for gold?
The more immediate price action will see market participants react to the situation in the Middle East between US and Iran. If things escalate further, that should see gold stay further bid but I would expect only a major escalation to see gold sustain a move above $1,600.
At this stage, I reckon buyers may also be looking to lock in profits as we near some key resistance levels - 61.8 retracement level @ $1,587 and the $1,600 handle itself.
There is room for some de-escalation in tensions so in turn that could see gold gains moderate a little - especially if you consider the fact that markets never move in a straight line.
Since breaking its 100-day moving average on Christmas Eve, gold has gained by ~5% in the span of just less than two weeks. That suggests there is room for some retracement down the road and de-escalation in US-Iran tensions will be a good reason for that.
In the bigger picture this month though, there is the seasonal pattern to consider but it looks like this has been beaten to death by now and market participants have probably front-run the move since late December already.
That is not to say that gold will not gain further, but I would argue that gains should remain more cautious amid the move higher we're seeing already over the past two days.
If anything, I reckon we could see gold gains normalise and moderate under $1,600 for now - barring any major escalation in US-Iran tensions - as the situation in the Middle East should keep demand for safety assets in the near-term.
But a drop back towards $1,520 or $1,500 shouldn't really materialise unless we see the situation completely defuse over the next week or so. Besides, as mentioned above, there is seasonality providing a tailwind for gold this month as well.
