Gold Lightly Bid on Tuesday

Gold prices are looking tentatively optimistic today with the futures market in the green though still down from last week’s highs. Global markets are very much in wait and see mode on the back of the stark ultimatum issued by Trump last night. The US President has threatened Iran with a sever escalation of the war unless it reopens the Strait of Hormuz today. With the prospect of a significant upside move in both crude and USD if Iran refuses and Trump launches fresh attacks, gold prices are vulnerable to a fresh drop lower. On the other hand, if Iran complies with Trump’s demands and strikes deal over the Strait of Hormuz, gold prices have room to surge higher as USD and oil recoil in that scenario. As such, volatility risks remain elevated near-term.

US Data & FOMC Mins Due

Traders will also be keeping an eye on fresh USD inputs this week. Gold prices sank on Friday as USD rallied in response to news of the better-than-forecast NFPs. With US jobs bouncing back, traders have further scaled back their Fed easing expectations. This week, trader swill be watching the latest FOMC minutes due on Wednesday followed by the latest CPI update on Friday. Both events look skewed towards bullish USD risks, creating bearish risks for gold. If the Fed is seen sounding alarmed over inflationary risks and inflation is then seen rising on Friday, this should drive gold lower near-term as USD rallies. This dynamic will be further strengthened if Trump escalates war with Iran.

Technical Views

Gold

The rally in gold has stalled for now into a retest of the broken bull channel lows, capped at the 4,7585.45 level. While 4,548.82 holds as support, focus is on a fresh push higher and a test of the 5,113.51-level next. T the downside, 4,3890.24 sits as the next support to watch if we turn lower again with 3,898.93 the deeper level to watch.