Gold At Risk Of Deeper Drop Over Iran War Re-escalation
Fresh Middle East Fears
Gold prices are on course to end the week firmly lower as a re-escalation in the US/Iran war sparks a renewed bid in USD and stokes inflation fears once again. Developments in the Middle East continue to prove difficult to navigate for investors. Plunging oil prices over June saw traders questioning the hawkish Fed expectations that had built up over prior months. This was seemingly brought into sharper focus by the plunge in the June NFP data as well as the monthly inflation report released this week. However, with oil prices rebounding sharply over the last fortnight amidst an uptick in hostilities between the US and Iran, traders are now fearful of a renewed inflation rise, putting cous back on possible Fed tightening this year.
Bearish Risks Building
Against this backdrop gold prices have fallen as traders anticipate a fresh topside run in USD. The Dollar had fallen sharply on the back of Tuesday’s heavier-than-forecast drop in inflation but is now starting to bounce again. If attacks between the US and Iran continue, USD should start to see a stronger safe-haven bid returning, putting further downside pressure on gold. As such, incoming headlines over the weekend will be closely watched with risks of a gap lower in gold next week is we see tensions continue to rise.
Technical Views
Gold
For now, gold prices remain anchored near the lower end of the falling wedge pattern which has framed the correction lower from YTD highs. 3,898.03 remains the key support level to watch with bulls needing to get back above 4,389.24 to alleviate downside risks.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.