FUNDAMENTAL
OVERVIEW
Gold started to find some
footing yesterday as risks of a US-Iran conflict increased. In fact, we got
a report from
Axios suggesting
that a war between the U.S. and Iran now appears increasingly likely. According
to the sources cited, there is currently no sign of a diplomatic breakthrough
between Washington and Tehran.
They also noted that, given
Trump’s recent military build-up and escalated rhetoric, it may be difficult
for him to de-escalate without Iran offering significant concessions on its
nuclear program. The report added that any military operation in Iran would be
massive, involving a weeks-long campaign that would resemble a full-fledged
war.
If a military conflict were
to break out, we would see oil prices skyrocket due to the risk of disruption
in the Strait of Hormuz, especially in light of the recent military drills.
This would be a negative shock for the global economy and lead to stagflation
risks.
Stagflation is the best environment
for gold, so we would highly likely see the price rallying into a new record
high very quickly. This risk should keep the market supported in the short-term
but if we get some clear de-escalation, like the US military withdrawing for
example, traders will quickly turn their focus back to the data and the Fed’s
interest rate path which is likely to continue to weigh on gold given the improvements.
Another risk is tomorrow’s
potential US Supreme Court decision on Trump’s tariffs. In fact, if the Supreme
Court were to rule against the tariffs, gold could experience another selloff
on positive growth expectations.
GOLD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that gold is still consolidating right in the middle of the all-time high
and the major trendline. From a risk management perspective, the buyers will
have a better risk to reward setup around the trendline to target new all-time
highs, while the sellers will look for a break lower to extend the drop into
the 4000 level next.
GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME
On the 4 hour chart, we can
see that the price broke above the downward trendline and the buyers piled in
to target the key resistance zone around the 5100 level. If the price gets
there, we can expect the sellers to step in again with a defined risk above the
resistance to position for a drop into new lows. The buyers, on the other hand,
will look for a break higher to increase the bullish bets into new record
highs.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, we
have a minor upward trendline now defining the bullish momentum on this
timeframe. We can expect the buyers to keep leaning on the trendline with a
defined risk below it to keep targeting the key resistance zone around the 5100
level. The sellers, on the other hand, will look for a break lower to pile in
for a drop into new lows. The swing low at 4960 will be the last line of
defence for the buyers as a break below it should open the door for a fall into
the 4878 level. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we get the latest US Jobless Claims figures. Tomorrow, we conclude
the week with the US Q4 GDP, the US PCE price index for December, the US Flash
PMIs and a potential US Supreme Court decision on Trump’s tariffs. Watch out
for US-Iran headlines as well.
This article was written by Giuseppe Dellamotta at investinglive.com.