Summary
- Gold remains supported by both potential outcomes of the US-Iran conflict as an escalation would fuel stagflationary concerns, while a de-escalation could trigger a dovish Fed repricing. The focus today will be on the US CPI data where a hot report could trigger a short-term downward spike, while soft data is likely to spark a rally.
Gold edged higher yesterday but couldn’t extend the gains above the recent highs as markets continue to wait for concrete US-Iran developments and the US CPI data.
On the US-Iran front, we got some positive headlines yesterday that led to an improvement in risk sentiment as hopes for a deal strengthened again.
It was reported that meetings between Trump, Vance and the Qatari PM were positive, and they discussed ways to progress talks with Iran.
Trump said after talks with the Qatari PM that Qatar would rather see a peaceful solution with Iran, but the US is ready for strikes if necessary.
Moreover, it was reported that the US has allowed a small uranium enrichment inside Iran, which Tehran agreed to, and preliminary agreement on reducing uranium enrichment is likely.
On the US CPI side, the data today could seal a rate hike for the December FOMC meeting, with traders already pricing in an 84% 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, barring an end to the Iran war. 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 still 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 minor upward trendline, to keep targeting the 4,500 level. The sellers, on the other hand, will look for a break below the upward trendline to extend the pullback into the major trendline next.
GOLD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we have another minor upward trendline that could act as support. We can expect the buyers to lean on the trendline, with a defined risk below it, to keep targeting the 4,500 level. The sellers, on the other hand, look for a break lower to extend the pullback into the 4,040 support next. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we have the US CPI report. Tomorrow, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the US PPI data.
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