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Gold’s price moved lower since the beginning of the week. Today we are to discuss the fundamental challenges laid ahead for the precious metal, the Israel-Iran tensions, the recent movement of US Yields, as well as the recent recession worries surrounding the US economy. Finally, we will be concluding this report with a technical analysis of gold’s daily chart.
Israel-Iran tensions take the spotlight once again
Tensions between Israel and Iran have taken the spotlight once again, with the two nations now seemingly preparing for a full-scale war in the region. That being said, we should note that this is the second time this year that we have seen the two nations at blows with one another.
Nonetheless, the most recent event which has brought the two nations to the brink of war, was the assassination of Hamas leader Haniyeh last Wednesday. The Hamas leader was assassinated in a compound in Tehran that was run and protected by the Islamic Revolutionary Guards Corp in an upscale neighbourhood per the New York Times. The death of Haniyeh sent shockwaves in the region, with Iran’s supreme leader allegedly giving the “green light” for Iran to directly attack Israel according to various media outlets. Furthermore, the situation appears to have escalated significantly, with the US stating that its citizens should book “any ticket available to them” , in addition to sending additional warships and military assets to the region in preparation of a full-blown war between Israel and Iran which also includes its proxy groups such as Hezbollah in Lebanon.
Therefore, should the two nations decide to exchange blows, we may see safe-haven inflows into gold’s price as it is considered to be a hedge during times of uncertainty. However, in the event of a de-escalation, it may weigh on gold’s price.
The sharp drop of US yields leaves gold unaffected
Since our last report, we note that US yields uniformly dropped and stayed at relatively low levels. It’s characteristic that the 2 year US bond yield reached levels not seen since 2023. The drop of US yields tends to imply that gold’s alternative as a safe haven, namely US bonds, may not be as attractive for investors and thus divert their attention towards the precious metal. Yet that does not seem to be the case in the past few days as gold’s price failed to benefit from the drop of US yields. Should US yields continue to fall, we may see them having a positive effect on gold’s price in the next few days, although that remains to be seen.
US recession worries in focus
Following the US Employment data for July, widespread concerns about a potential recession in the US have risen. In particular, the unemployment rate was expected to remain steady at 4.1% and the average earnings growth rate to slow down to 3.7%, and the NFP figure to drop to 175k. Instead, the average earnings growth rate came in at 3.6%, the NFP figure dropped to 114k and the Unemployment rate ticked upwards to 4.3%, implying a loosening labour market in the US. As such, following the release of the US Employment data, widespread fears of a potential recession in the US led to a massive selloff across all asset classes, with investors opting to increase their cash holdings, possibly in order to re-enter the market once the dust settles. Hence, it appears that gold which was trading near its all-time high figure was not spared from the market selloff which saw Japan’s Topix index tumbling more than 12% in the biggest sell-off since the “Black Monday” crash of 1987. Nonetheless, should we see Fed policymakers adopting a more dovish tone in the coming week in order to ease market worries, it may further weigh on the greenback, which in turn may encourage investors to re-enter the market and thus could possibly aid the precious metal’s price.
Gold Technical Analysis
XAUUSD Daily Chart
- Support: 2390 (S1), 2330 (S2), 2275 (S3)
- Resistance: 2470 (R1), 2520 (R2), 2570 (R3)
Since our last report gold’s price has resurfaced above the prior resistance now turned to support level at the 2390 (S1) figure. We opt for a sideways bias for the precious metal and supporting our case is the precious metal’s price action which failed to close below our S1 support level, despite piercing it. Furthermore, the RSI indicator below our chart currently registers a figure near 50, implying a neutral market sentiment.
However, we would also like to note that our upwards-moving trendline which was incepted on the 25th of June has been broken implying a bearish market tendencies. Nonetheless, for our sideways bias to continue, we would require the commodity to remain confined between the 2390 (S1) support level and the 2470 (R1) resistance line.
On the flip side, we would immediately switch our sideways bias in favour of a bearish bias in the event of a clear break below the 2390 (S1) support level with the next possible target for the bears being the 2330 (S2) support base. Lastly, for a bullish outlook, we would require a clear break above the 2470 (R1) resistance level with the next possible target for the bulls being the 2520 (R2) resistance line.
Disclaimer:
This information is not considered investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced or hyperlinked in this communication.
JA 
