On May 8, we noted on the previous day that signals of de-escalation in the Middle East had led to a sharp short-term decline in oil prices, providing support for a rise in gold. Consequently, our trading recommendation was to watch for support at $4,700, followed by $4,660, and monitor the breakout situation near the resistance level of $4,753. A firm hold above this level would allow focus to shift to the key $4,800 mark, with further gains potentially targeting $4,900.
Subsequent price action showed gold continuing its upward probe during the European session on Thursday, breaking higher after the U.S. market open to reach a daily peak of $4,764. However, the rally quickly met resistance, and the price retreated, erasing all daily gains to hit a low of $4,686 by the close. On Friday, gold found support after dipping to $4,681 and rebounded to $4,734 before encountering resistance again; it is currently trading around $4,718. Overall, while Thursday's rebound was capped, the subsequent pullback has been limited, and the stabilization and renewed upward probe on Friday suggest potential for further advances.
Analysis suggests gold's initial surge on Thursday, which pushed it to a fresh two-week high, was driven by safe-haven demand. This was triggered by reports of a halted naval escort operation and concerns over renewed conflict, coupled with news indicating the U.S. and Iran were nearing a memorandum of understanding aimed at ending hostilities. This development caused a significant short-term drop in oil prices, which hit a two-week low, thereby easing inflation pressures and supporting gold's rise. However, gold's retreat from its highs during the U.S. session was primarily due to a targeted U.S. strike on Iran, which prompted a rebound in oil prices that recouped the day's losses. Subsequently, U.S. officials clarified the strike did not signify a resumption of war, and a statement affirmed the ongoing validity of the ceasefire agreement. This led to renewed pressure on oil prices at Friday's open, providing fresh support for gold's rebound.
On the daily chart, gold has rebounded from its lows to a new two-week high. Despite meeting resistance on Thursday, the pullback has been shallow, indicating relative short-term strength. Key support levels to watch are the intraday low near $4,680 and the low point of $4,660 following Wednesday's rally; a firm hold above these levels could facilitate another push higher. Immediate resistance is seen at Thursday's high of $4,764, followed by the significant $4,800 level. Technical indicators, including a golden cross formation between the 5-day moving average and the MACD, alongside upward-trending KDJJ and RSI, suggest underlying momentum for a continued rebound.
Intraday Outlook: Despite the targeted U.S. strike on Iran, accompanying assurances that it does not signal a return to war and that the ceasefire remains effective have fostered market optimism for a cooling Middle East situation. This has put renewed pressure on oil prices after their Thursday rebound, thereby supporting gold. Trading strategy should adopt a range-bound approach, with support monitored at $4,680 and $4,660, and resistance watched at $4,764 and $4,800.
Comments