Gold is trying to find a bottom.
It’s been skipping along the $3900 level for a month now and was able to withstand the recent 13-day US bombing campaign of Iran without breaking to new lows. That’s a good sign for the bulls amidst reports that China has resumed buying.
Peace is a pre-requisite for positive price action as it will mean lower energy prices and — in time — a path to rate cuts. For now, the market is anxious about a Fed rate hike. For this week’s meeting, there is a 33% implied probability of a rate hike. If that comes to pass, it will likely hit gold initially. However, I tend to think that dip would be worth buying as a central bank that’s suddenly hawkish would set the table for lower rates down the line.
The bigger driver in the next month is going to be what happens in Iran. There is some optimism today with gold up $58 to $4110 but we’re far from a resolution. The MOU fell apart almost immediately and it’s tough to imagine the latest bombing campaign will be enough for Iran to seriously compromise. If anything, the rapid rise in oil prices after two weeks of bombing (crude up almost 30%) hands Tehran leverage to push for better terms.
Eyes will be on indications of Asian buying from here.
This article was written by Adam Button at investinglive.com.