Gold continues to
consolidate around recent highs as markets await new US-Iran developments and
the US CPI report tomorrow.
On the US-Iran
front, Trump told CNN that the US is unlikely to resume military action against
Iran if negotiations make sufficient progress on Tehran’s nuclear programme and
the reopening of the Strait of Hormuz. However, he stressed that any decision
to avoid further strikes would depend on Iran agreeing to a strong enough deal,
adding that the US remains ready to take military action if necessary.
US Secretary of
State Rubio said negotiations with Iran have made little progress, describing
Tehran’s demands as unacceptable, but stressed that Washington remains open to
pursuing a diplomatic resolution.
On the US CPI
side, the data tomorrow could seal a rate hike for the December FOMC meeting,
with traders already pricing in a 79% probability.
If we get a hot
report, we could see a downward spike in gold, but I would expect the losses to
be faded. This is because rate hikes at this point should put even more
downward pressure on the stock market and long-term Treasury yields amid growth
concerns. Soft data, on the other hand, should trigger an immediate rally on a
dovish repricing.
Keep in mind that
in the current context, if Trump decides to escalate the war, inflation
expectations would rise alongside weakening growth outlook, creating a
stagflationary environment. This should 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.
GOLD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that gold (CFD contract) is consolidating
above the broken trendline. The buyers will likely continue to pile in around
these levels, with a defined risk below the trendline, to keep targeting new
highs. The sellers, on the other hand, will need to see the price breaking
below the major upward trendline to open the door for new lows.
GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME
On the 4 hour chart, we have
a minor support zone around the 4,040 level. If we get another pullback, we can
expect the buyers to step in around the support, with a defined risk below the
broken trendline, to keep targeting the 4,500 level. The sellers, on the other
hand, will look for a break below the support to extend the pullback into the
minor upward trendline next.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, we
have another minor upward trendline that could act as support. The buyers might
want to split their positions in case the price breaks the trendline and eventually
bounces around the support. The sellers, on the other hand, will need to wait
for a break below the support to open the door for new lows. The red lines
define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow we have
the US CPI report. On Thursday, we get the latest US Jobless Claims figures. On
Friday, we conclude the week with the US PPI data.
This article was written by Giuseppe Dellamotta at investinglive.com.
