Gold extended the losses
yesterday after Trump stated on Truth Social that the US does not need a deal
with Iran and directed Vice President Vance to focus on domestic matters.
The US dollar and
Treasury yields jumped following his remarks, while oil prices extended the gains,
fuelling inflation concerns and expectations of additional rate hikes.
There’s clearly
strong downward pressure at the moment amid the hawkish repricing, higher real
yields and stronger US dollar.
Looking ahead, I
would expect rate hikes to start putting significant downward pressure on the
stock market and long-term Treasury yields amid increased growth concerns given
the longer than expected US-Iran tensions.
I think that in
the current context, if Trump decides to escalate things with Iran, inflation
expectations would rise alongside a weakening growth outlook, creating a
stagflationary environment. And this should ultimately be bullish for gold. At
the same time, if we get a de-escalation, we could see a dovish repricing on
easing inflation concerns, which should also support gold in the short-term.
There are certainly
strong headwinds for gold, so these fundamental views will need to be paired
with technicals for a confirmation of a change in momentum.
GOLD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that gold(CFD contract) extended the
selloff into the key 3,885 support zone where we have also the major upward trendline
for confluence. We can expect the buyers to pile in around the support, with a
defined risk below the recent low, to position for a rally into the 4,700 level.
The sellers, on the other hand, will want to see the price breaking lower to
increase the bearish bets 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 momentum. If we get a pullback, we
can expect the sellers to lean on the trendline, with a defined risk above it,
to keep targeting new lows. The buyers, on the other hand, will look for a
break higher to increase the bullish bets into the 4,700 level, with the 4,200
level as the first target.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here as the sellers will have a better risk to reward setup
around the downward trendline, while the buyers will likely continue to pile in
around these levels to target a rally into the 4,700 level. The red lines
define the average daily range for today.
UPCOMING CATALYSTS
Today we conclude the week
with the US PPI data.
This article was written by Giuseppe Dellamotta at investinglive.com.