Gold rebounded yesterday on renewed hopes for a
US-Iran deal. The market started to move when Iran’s state media reported that
Iran’s security chief met with the Supreme Leader Khamenei. Sources said that
Khamenei stressed in the meeting the importance of pursuing Iran’s interests
and implementing its conditions with the aim of ending the war and the stalemate
situation.
It was just a quick headline with little substance,
but markets reacted positively as they are desperate for good news. The
narrative was that Iran’s security chief was bringing the leader some kind of
framework for a deal. The markets might also be very sensitive to deal
developments given the proximity to the US midterm elections.
This morning, Reuters reported that Qatari mediators
presented Iran with new draft deal in Tehran on Sunday and that Iran is considering
the proposal, with response expected by the end of the week. The report added
that the draft sets a seven-day timeline addressing both sides’ concerns, each
side must make daily confidence-building steps. Timeline could begin early next
week depending on Iran’s response.
Today we have also the FOMC decision where the Federal
Reserve is widely expected to keep interest rates unchanged at 3.75–4.00%. With
no new projections or dot plot expected at this meeting, changes in Fed Chair Warsh’s
or statement’s language will be the main focus.
A surprise rate hike would trigger a hawkish repricing
and weigh on gold in the short-term. A largely neutral outcome that avoids
signalling an imminent rate hike could be taken as dovish and trigger a relief
rally in precious metals. I would also expect the same reaction but with less
magnitude in case the Fed just delivers on the hawkish hold expectations,
avoiding major surprises.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that gold(CFD contract) pulled back a
bit and it’s approaching the downward trendline. If the price gets there, we
can expect the sellers to lean on the trendline, with a defined risk above it,
to keep targeting the 3,885 support zone. The buyers, on the other hand, will
want to see the price breaking higher to pile in for a rally into the 4,700
level next.
GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME
On the 4 hour chart, we can
see that the price rejected the resistance zone around the 4,070 level as the
sellers stepped in to target a drop into the 3,885 level. If we get a breakout,
the buyers will likely pile in for new highs, with the downward trendline as
the first target. The sellers, on the other hand, will continue to step in
around the resistance and the trendline to keep pushing into new lows.
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 resistance and the trendline, while the buyers will need the price
to break above those key levels to open the door for new highs. The red lines
define the average daily range for today.
UPCOMING CATALYSTS
Todaywe
have the FOMC rate decision. Tomorrow, we get the US GDP report, the US PCE and
the latest US Jobless Claims figures. On Friday, we conclude the week with the
US Employment Cost Index.
This article was written by Giuseppe Dellamotta at investinglive.com.