Gold Outlook: Middle East in the spotlight once again

Since our last report Gold’s price, appears to be moving in a sideways trajectory. In today’s report we are to discuss mainly fundamental issues and we intend to end the report with a technical analysis of Gold’s daily chart.          

US-Iran takes the stage once more

The US and Iran exchanged verbal threats over the weekend. In particular, President Trump threatened Iran that if they did not agree to a deal, they could face economic destruction or even a wipe of their leadership. As expected, Iran responded by stating that it would retaliate harshly to any fresh attack. However, despite the strong language being used, the US President signalled that he would be open to meeting with Iran’s President during the UN General Assembly, which is taking place this week in New York.

Therefore, the possibility of the US and Iran discussing a possible framework on the easing of tensions in the region could possibly weigh on gold’s price should such a discussion take place and prove to be fruitful. Therefore, any talks which appear to be making progress on the front of de-escalating the tensions in the Middle East could weigh on gold’s price as a result of safe haven outflows.

Fed hiked by 25 basis points as was expected last week

We would like to recap last week’s interest rate decision by the Federal Reserve despite the market impact having occurred. The Fed hiked rates by 25 basis points as was expected, yet in the bank’s accompanying statement it appeared to be relatively hawkish in nature, with the following being stated that “for more than five years, inflation has been running above….The plain fact is that inflation is too high and has been for too long.” The comments showcase that the bank is prepared and willing to hike rates in order to achieve their goal.

Moreover, it was stated that “This summer’s inflation readings do not tell me that underlying trends have meaningfully improved”, further adding that inflation may need to be brought back under control. In turn, the commentary may have aided the dollar whilst weighing on gold’s price given the inverse relationship between the two assets. Overall, should Fed policymakers adopt a more hawkish stance in their public engagements up until the bank’s next meeting, it could weigh on the precious metal’s price.

Trump’s calls for Ukraine-Russia war to end President Trump on a TruthSocial post stated that “Russia has unfortunately lost control of its diesel oil industry due to its War with Ukraine….This ridiculous and never-ending war with Ukraine must be ended”. The comments by the President could lead to increased political pressure on Ukraine to reach some form of agreement with Russia in the near future or at least lay down some groundwork for peace talks. In turn any indication of such a scenario could weigh on gold’s price. However, considering how long this war has been going on for and the numerous attempts to de-escalate the situation, gold’s price may not be influenced until meaningful discussions are held.

기술적 분석

XAU/USD Daily Chart

Gold’s price appears to be moving in a sideways fashion. The precious metal’s price has resurfaced above our 4335 (S1) support level. Moreover, the RSI indicator below our  For our sideways bias to be maintained we would require the precious metal’s price to remain confined between our 4335 (S1) support level and our 4520 (R1) resistance line. On the other hand, for a bearish outlook, we would require a clear break below our 4335 (S1) level, with the next possible target for the bears being our 4180 (S2) support line. Lastly, for a bullish outlook, we would require a clear break above our 4520 (R1) resistance line with the next possible target for the bulls being our 4695 (R2) resistance level.

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