Gold stays on the backfoot amid hawkish Fed risk, prolonged US-Iran stalemate

FUNDAMENTAL
OVERVIEW

Gold has been bouncing around for the entire week on positive and negative
US-Iran headlines. Yesterday’s rally came after Trump touted once again on
Truth Social that a deal with Iran is in final stages. The gains were
eventually faded as nothing of substance has yet been reached.

The negotiating deadlock has been dragging on for a long time and oil
prices are likely to remain persistently elevated until the Strait of Hormuz is
reopened.

This keeps increasing the risk of a hawkish Fed. More and more policymakers
are now pushing for dropping the easing bias, so we can expect that to happen
at the upcoming FOMC meeting. Moreover, if nothing changes on the Strait of
Hormuz side before then, we might get a hawkish surprise as inflation continues
to run hot and the US data remains resilient.

In the short-term, a resolution and the reopening of the Strait will likely
support gold on falling oil prices and increased rate cut bets. But if the
Strait remains closed for longer and oil prices stay elevated, the risk of the
Fed being forced to hike anyway increases, and that’s going to keep weighing on
gold.

Today, we have the US NFP report. The focus will likely be on the
unemployment rate which is expected to remain unchanged at 4.3%. A drop to 4.2%
or lower could trigger another selloff in gold as traders would increase Fed
rate hike bets. Conversely, a 4.4% rate or higher might give gold a short-term
boost as some of the hawkish expectations get pared back.

GOLD TECHNICAL
ANALYSIS – DAILY TIMEFRAME

On the daily chart, we can
see that gold is still consolidating as traders await new catalysts to push the
price into either direction. We are trading right in the middle of the two key
trendlines, so there’s not much we can glean from this timeframe. We need to
zoom in to see some more details.

GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME

On the 4 hour chart, we
have a key resistance zone around the 4,585 level where the price got rejected
from several times. From a risk management perspective, the sellers will have a
better risk to reward setup around the resistance and the downward trendline to
position for a drop into new lows. The buyers, on the other hand, will need the
price to break above the trendline to open the door for a rally into the 4,800
level next.

GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME

On the 1 hour chart, we have
a choppy price action which makes it harder to find good levels where to lean
on considering the daily US-Iran noise. For now, we have a clear support zone
around the 4,425 level. We can expect the sellers to pile in on the break of
the support to target the 4,350 level. The buyers, on the other hand, will want
to see the price breaking above the 4,490 resistance to position for a rally into
the 4,585 resistance next. The red lines define the average daily range for today.

UPCOMING CATALYSTS

Today, we conclude the
week with the US NFP report.