FUNDAMENTAL
OVERVIEW
Gold came back under pressure last week after Trump poured some cold water on expectations of an earlier
end to the Iran war when he repeated that the US would make a deal with Tehran
after the November elections. Oil prices, real yields and the US dollar started
to rise again after his remarks and weighed on gold.
Heading into the weekend, the hopes for a
US-Iran deal returned after Iran sent a proposal to reopen the Strait of Hormuz
within seven days on certain conditions and helped averting a collapse in the
precious metal.
Unfortunately, Trump rejected the proposal on Saturday and told reporters that he expected
to resume bombing Iran after the midterms. Unsurprisingly, gold opened the week lower and extended the losses
throughout the Asian session as the earlier optimism faded.
The focus will remain on the Middle East and the
Fed. A breakthrough would be positive for gold in the short-term as the
aggressive rate hike bets will likely get pared back. A prolonged stalemate or
even a re-escalation, on the other hand, will likely continue to weigh on the
precious metal.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see gold(CFD contract) eventually
collapsed after Trump rejected the latest Iranian proposal to reopen the Strait
of Hormuz. All else being equal, the next natural target should be the 3,885
level where we will also find a major upward trendline. If the price gets
there, we can expect the buyers to step in with a defined risk below the upward
trendline to position for a rally into new record highs. The sellers, on the
other hand, will look for a break to extend the drop into the 3,500 level next.
GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME
On the 4 hour chart, we
have a downward trendline defining the bearish structure. If the price pulls
back into the trendline, we can expect the sellers to lean on it, with a
defined risk above it, to keep targeting the 3,885 level. The buyers, on the
other hand, will want to see the price breaking higher to position for a
correction into the 4,500 level next.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can glean from this timeframe given the strong move lower and the
lack of key technical levels nearby. The sellers might want to wait for a pullback
that could provide a counter-trendline and then wait for the break to pile in
for new lows. The buyers, on the other hand, will likely use a potential
counter-trendline to keep pushing into the major downward trendline. The red
lines define the average daily range for today and shows how strong the
selloff has been.
UPCOMING CATALYSTS
Tomorrow, we get the US
Consumer Confidence report and the US Job Openings data. On Wednesday, we have
the US ADP and the US PCE price index. On Thursday, we get the US ISM
Manufacturing PMI and the latest US Jobless Claims figures. On Friday, we
conclude the week with the US NFP report.
This article was written by Giuseppe Dellamotta at investinglive.com.