The push and pull continues for gold, as traders are still trying to make sense of what to do with the US-Iran situation. Deal or no deal? That remains the question.
The longer that the whole saga drags on, there’s also a negative undercurrent that looks set to run over gold prices in the bigger picture.
Oil prices may have come off the boil but the fact remains that the Strait of Hormuz is closed. In that lieu, the threat to inflation pressures remain amid higher input costs to business with supply chain disruptions also still persisting. As such, a more hawkish view to major central banks will stay as a big threat to the structural outlook for gold.
Gold (XAU/USD) daily chart
But in the meantime, the precious metal will still be subject to US-Iran developments for the most part.
While there hasn’t been any fresh leads, we’re still seeing some swingy movement in gold over the past week or so. We saw price dip down to a two-month low last week, only to be arrested by a key technical support level. The 200-day moving average (blue line) remains a key line in the sand for now. That was the same level that held the drop during March trading.
Despite that, there isn’t much appetite to be chasing a bounce either. With the recovery to around $4,533 now, gold prices are just 0.15% lower than the close set out on 15 May. In just a little over two weeks, the precious metal hasn’t really done much besides facing some constant pushing and pulling.
The US and Iran supposedly moving closer to a deal looks to be a good thing for gold. However, they have been at this juncture for well over two weeks now.
On the flip side, gold will also have to contend with a more hawkish take by major central banks in dealing with the fallout from the Middle East war. The most particular one will be the Fed outlook, with traders continuing to gradually expect more hawkish connotations for the central bank as the conflict drags on.
The question remains, can the short-term optimism eventually tide over the long-term skepticism? That will ultimately decide which direction gold breaks out to next. But with each passing day that this continues, it’s getting harder and harder to say with the same conviction that gold need not worry about central bank actions and/or the inflation picture.
