On July 22nd, our analysis for Tuesday highlighted that renewed US-Iran tensions, which pushed oil prices higher, coupled with the Federal Reserve's hawkish stance and the market's expectation for sustained high interest rates, continued to suppress the gold price. Our trading strategy therefore recommended viewing support levels at $3980, followed by $3960 and $3943, and resistance levels at $4020, followed by $4040 and $4060, with a range-trading approach. We advised following a breakout in either direction.
Looking at the subsequent price action, gold opened slightly lower during Tuesday's Asian session but stabilized around the key $4000 level. It then fluctuated higher, encountering resistance at $4084. The European session saw a pullback, with gold finding support around $4044 at the US open before rebounding to face resistance again near $4087. On Wednesday's opening, gold broke higher, reaching $4141 before pulling back slightly. It is currently trading near $4116, holding above the $4100 psychological level. Overall, gold has broken out of its previous low-range consolidation, moving upward with stronger short-term momentum than initially anticipated.
Despite escalating US-Iranian conflict driving oil prices to a one-month high, the price of gold did not probe for new lows. Instead, it stabilized and rebounded, reaching its highest level in about a week. This is primarily attributed to the fact that, alongside military posturing, both the US and Iran have kept diplomatic channels open, preserving hope for negotiations. The US has expressed openness to talks, while Iran has called on Pakistan to continue its mediation role. Additionally, heightened geopolitical tensions in the Middle East have spurred some safe-haven capital flows, bolstering demand for gold. However, the market's expectations regarding Federal Reserve policy remain a crucial factor influencing gold's trajectory. If oil prices continue to rise, stoking inflation concerns, the resulting anticipation of prolonged high interest rates could limit the scope of any further gold rally.
On the daily chart, gold has stabilized and rebounded from near its six-month low, reaching a new weekly high, indicating a short-term bias that is consolidating with upward momentum. Key support is seen at the $4100 level, where the price stabilized after an initial pullback on Wednesday; this level also coincides with the weekly MA5. Further support can be observed at Tuesday's closing price of $4076, which also served as the intraday low and was tested multiple times at the open. Immediate resistance is at the day's high of $4141, aligning with the upper Bollinger Band on the 4-hour chart. A sustained break above this level could see gold target the daily Bollinger Band upper boundary near $4180. Technical indicators show the 5-day MA turning upward from a bearish crossover, with the MACD forming a bullish crossover and both the KDJ and RSI indicators in bullish configurations, suggesting potential for further short-term gains.
In summary, while US-Iran military tensions have escalated, the retention of a diplomatic window has created an opportunity for a gold price rebound. The recommended trading approach remains to treat the market with a range-trading mindset. Support levels to watch are $4100 and $4076, while the key resistance to monitor is the $4141 level. A firm break and hold above this resistance could open the path towards $4180.
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