On Thursday, the conflict between the US and Iran has reached its 153rd day, while renewed tensions in the Middle East have arisen after the U.S. launched fresh strikes against Iran overnight, with U.S. Central Command describing the attacks as “a powerful response” to what it said were attempted Iranian strikes on American forces a day earlier.
initially rallied after the Federal Reserve left interest rates unchanged, as Treasury yields retreated and the weakened immediately following the policy decision, increasing the appeal of non-yielding bullion.
However, the rally faded as investors digested Chair Kevin Warsh’s remarks, in which he reiterated the Fed’s commitment to returning inflation to its longstanding 2% target despite leaving policy unchanged.
The US Dollar Index was last little changed around 100.9, while also recovered from their post-decision lows, limiting further upside for bullion.
Markets now price roughly a 64% probability of a September rate hike, down from around 81% before the Fed’s policy announcement, according to CME FedWatch.
At the same time, renewed tensions in the Middle East after the U.S. launched fresh strikes against Iran overnight, with U.S. Central Command describing the attacks as “a powerful response” to what it said were attempted Iranian strikes on American forces a day earlier.
President Donald Trump earlier vowed to retaliate against Tehran, saying the U.S. would respond forcefully after the military intercepted what it described as a surprise Iranian attack on U.S. forces.
The renewed escalation kept oil prices elevated as traders weighed the risk of further disruptions to energy supplies. Shipping concerns also intensified after the Iran-backed Houthis warned they would target Saudi vessels attempting to reach the Indian Ocean, prompting some tankers to seek alternative routes.
Persistent strength in energy markets has reinforced concerns that inflation could remain sticky, complicating the Federal Reserve’s path toward easing monetary policy.
Investors now await Thursday’s U.S. Personal Consumption Expenditures price index – the Fed’s preferred inflation gauge – for fresh clues on the inflation outlook and the likely path of interest rates.
Attention will also turn to policy decisions from the Bank of England and the Bank of Japan later this week, with both central banks expected to leave rates unchanged.
Technical Levels to Watch
On a monthly chart, gold futures, after starting this month at $4,025, tested the month’s high at $4,215.50 and months’s low at $3,963, are trading at $4,040, just below the key resistance at the 9 EMA ($4,281), and have formed a “Bearish Hammer”, signaling extensive bearish pressure, as the futures are near month’s closing this Friday.
Undoubtedly, if the gold futures close this month near the immediate support at the 20 EMA ($3,887), it will ensure continuation of selling pressure during the next month, and a breakdown below this key support at the 20 EMA could push the futures to maintain a slide at a 60-degree angle.
On a weekly chart, after starting this week at $4,097.50, tested the week’s high at $4,119.30, and the week’s low at $3,993.75, gold futures are $4,032, signaling surging weakness, as currently facing significant resistance below the key resistance at $4,090, where a breakdown below the last week’s low could accelerate sell-off, and could continue a slide at a 55-degree angle on the weekly chart next week.
Undoubtedly, weakness could surge as the gold futures are trading on weekly charts, much below the formation of a “Bearish Crossover”, formed with a downward move by the 9 EMA, which has come below the 50 EMA.
On a daily chart, after opening the day at $4,081.70, it tested the day’s high at $4,089.35 and the day’s low at $4,035, facing significant resistance at the 20 EMA ($4,084.95), and found a breakdown even below the 9 EMA ($4,061), signaling extensive selling pressure due to fading Fed hope and elevated energy-driven inflationary pressure.
Undoubtedly, a breakdown below the immediate support at $4,024 could push the futures to hit the key support at $3,955 in today’s session.
Disclaimer: Readers are advised to take any position in gold at their own risk, as this analysis is based solely on observations.
