Gold prices are seeing a rebound as lower oil prices reduce market concerns about inflation, which in turn dampens expectations for further interest rate hikes. On Tuesday, gold tested the $4046 support level multiple times during the European session before finding stability. This followed a similar pattern on Monday, where the price had repeatedly held at $4046 in Asian and European trading before eventually breaking lower. However, Tuesday saw the metal rally from this level, hitting a daily high of $4106 during the US session before settling back at $4074 at the close. On Wednesday, gold continued its upward momentum, reaching intraday resistance at $4179, and is currently trading near $4155. After a period of consolidation, gold’s short-term volatility has increased as it tests the upper boundary of the recent one-month box range, the $4200 round number.
Analysts point to the fluctuating situation in the Middle East as a key driver. Former President Trump's statement that he had called off a strike on Iran initially pushed gold prices higher at the open. However, this move was quickly reversed after Iran denied the claim, calling it a new lie, which led to a pullback in the gold price. Despite this, the absence of a large-scale US military strike has eased regional tensions. The resumption of negotiations between the US and Iran has reignited hopes that the conflict could be resolved through diplomacy, a sentiment reinforced by positive signals from Qatari and US officials. Reports of progress in efforts to end the conflict and discussions on reopening the Strait of Hormuz have contributed to a decline in oil prices. This reduction in oil prices has lowered market inflation fears, which in turn has dampened expectations for a Federal Reserve rate hike, providing support for a short-term gold rebound.
Where to focus next
On the daily chart, gold’s recent rebound remains within the range-bound trading pattern of the past month. Key support levels to watch include the $4100 psychological level, followed by the daily Bollinger Band middle line at $4060. On the upside, resistance is seen at the current intraday high of $4180, with the major barrier at the $4200 round number, which is the upper edge of the month-long consolidation zone. A decisive break above $4200 would open the door for further short-term gains. The daily Bollinger Bands are showing a slight expansion, with the middle line trending marginally upward. Short-term moving averages are forming a bullish cross, suggesting the potential for an uptrend to begin. Furthermore, the MACD, KDJ, and RSI indicators are all showing bullish crossovers, pointing to a strengthening of short-term momentum and the possibility of further gains.
Trading strategy for the day
The current market environment is shaped by the pause in US strikes on Iran and the restart of negotiations, which has fuelled optimism for a diplomatic resolution to the conflict. Falling oil prices are easing inflation concerns, which in turn reduces the likelihood of a rate hike and supports the gold price rebound. The recommended approach is to treat the market as range-bound. On the downside, key support is at $4100 and $4060. On the upside, resistance is located at $4180 and $4200. A break above $4200 would signal a new short-term uptrend.
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