On Friday, as the US-Iran conflict entered its 147th day, persistent energy and trade shocks emerged just days before the July policy meeting. These developments prompted money markets to rapidly price in expectations of tighter monetary policy. Swaps markets now indicate a near-certainty of an interest rate hike at the Federal Reserve’s September meeting.
On Thursday, remained in a narrow range, as after opening the day at $$4,135.67, reached a day’s high at $4,143.76 and a day’s low at $4,042.65, closed the day at $4,050, after testing a high at $4,172 on Wednesday, in follow-up of a rally, started since last Friday, when gold futures tested a low at $3,963.30, just above the key support at $3,955.16.
Today, on the daily chart, after opening the day at $4,050, gold futures tested the day’s high at $4,072.97 and the day’s low at $4,024.20; gold futures are trading at $4,060.70, trying to defend the immediate support at $4,042.80, where a breakdown could trigger a sell-off before this week’s close.
At the same time, on the weekly chart, after opening the week at $4,005.60, gold futures tested the week’s high at $4,1,71.40. Week’s low at $3,986.50; gold futures are trading at $4,068.20, signalling extensive bearish pressure, and look ready to complete a “Bearish Hammer”, as the 9 EMA ($4,207) has pierced the 50 EMA ($4,234), forming a “Bearish Crossover”.
On Thursday, Iran-backed Houthi militants in Yemen said they had launched attacks at Saudi tankers in the Red Sea. The strikes, coupled with ongoing tit-for-tat bombardments between the U.S. and Iran, caused , the global oil benchmark, to top $100 a barrel briefly.
This exacerbated concerns over an energy-driven inflation burst that could persuade central banks, including the Federal Reserve, to tighten monetary policy in response. With these expectations in mind, climbed, weighing on precious metals.
Meanwhile, U.S. Treasury yields held near multi-month peaks on Friday, as crude oil’s jump past $100 a barrel and new import tariffs reinforced fears of sticky inflation, locking in market expectations that the Federal Reserve will consider raising interest rates again in September.
I find that the central banks continue to take a measured approach to the renewed surge in energy prices; there is still plenty of scope for the turbulence in markets to ratchet higher if the U.S.-Iran conflict continues to escalate.
Undoubtedly, Friday’s closing level of the gold futures will provide a few clues on the further directional trend, as Gold Rally Risks Becoming a Bull Trap as Energy Inflation Pressures Central Banks ( https://www.investing.com/analysis/gold-rally-risks-becoming-a-bull-trap-as-energy-inflation-pressures-central-banks-200684460 ), while the markets will get a final clue from the Fed’s meeting on July 27-28 this year.
I conclude that if gold futures close this week, even below the psychological support at $4,000, weakness could persist during the upcoming week, despite wobbly moves till the Fed meets.
Expected Last-Hours Move on 1-Hr. Chart
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Disclaimer: Readers are advised to take any position in gold at their own risk, as this analysis is based solely on observations.
