Gold spiked to the
upside yesterday as expectations for a US-Iran deal strengthened after Iran’s
President said that the Supreme Leader granted the government certain authorities
regarding negotiations.
The markets took
the news as a signal for greater flexibility to reach a deal since strategic
decisions remain under the authority of the Supreme Leader.
The gains faded, though,
after the US struck sites on Iran’s Qeshm Island overnight, with US officials
saying the strike was in response to Iran firing at a US aircraft and did not
mark the start of expanded US operations.
Trump said that he’s not looking to strike Iran after the midterm elections,
but officials confirmed that he’s weighing all options. Moreover, Axios
reported that the CIA Director advised Trump to maintain a “no war, no deal”
approach and let economic pressure on Iran continue.
Looking ahead, today we have the US midterm elections, although we will
get the first results very late in the day. The Democrats are widely expected
to take the House, so that should be already priced in. The more out of consensus
outcomes would be a red sweep and a blue sweep.
In the first case, we could see gold coming under pressure amid further
tax cuts and higher defence spending potentially leading to a repricing in
Treasury yields to the upside. In the second scenario, we could see the
opposite of that as a Democratic victory would likely bring legislative gridlock
on the agenda.
GOLD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that gold (CFD contract) bounced around
the key support zone around the 3,885 level before pilling back a bit. If we
get another retest of the support and the major upward trendline, we can expect
the buyers to step in, with a defined risk below the trendline, to position for
a rally into new record highs. The sellers, on the other hand, will look for a
break 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 minor resistance zone around the 3,980 level. If the price gets there, we can
expect the sellers to step in around the resistance, with a defined risk above
it, to keep targeting a break below the upward trendline. The buyers, on the
other hand, will look for a break higher to increase the bullish bets into new
highs, with the major downward trendline as the first target.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, we can
see the price broke above the trendline yesterday as expectations for an
imminent US-Iran deal strengthened but eventually gave back most of the gains after
the overnight setback. From a risk management perspective, the buyers will
continue to have a better risk to reward setup around the 3,885 support zone, while
the sellers will need a break below the upward trendline to open the door for
new lows. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we
have the US Job Openings data and the US midterm elections, although we will
get the first results early tomorrow. Tomorrow, we have the US ADP and the US
ISM Services PMI. On Thursday, we get the latest US Jobless Claims data. On
Friday, we conclude the week with the US NFP report and the University of
Michigan Consumer sentiment survey.
This article was written by Giuseppe Dellamotta at investinglive.com.
