Gold prices declined by more than one percent during Monday's European trading session, approaching the $4,040 level.
Market concerns over the potential closure of the Strait of Hormuz have driven a significant surge in oil prices. This development has, in turn, revived expectations that interest rates may need to remain elevated for an extended period to combat inflationary pressures. These market movements follow the exchange of large-scale missile and drone attacks between U.S. and Iranian forces over the weekend. On Sunday, Tehran targeted U.S. facilities in several countries across the Gulf region and reiterated its threat to close the critical waterway.
The interaction between the Gulf conflict and monetary policy is expected to continue dictating the direction of gold and broader risk sentiment in the coming trading sessions. With oil prices, the U.S. dollar, and interest rate expectations now moving in the same direction—and with the Federal Reserve explicitly linking war-related energy costs to the inflation outlook—this dynamic is likely to persist. This logic could strengthen further if the pace of attacks around the Strait of Hormuz continues at its current level.
Technical Analysis of Gold
From a daily chart perspective, the MACD indicator shows its red histogram continuing to shorten, with the two lines showing signs of further convergence. The RSI has retreated to the vicinity of the neutral zone, indicating a short-term market structure that is consolidating with a bearish bias.
On the 4-hour chart, the gold price is trading near the short-term moving averages. The MACD continues to operate around the zero line, with its red histogram narrowing further. The RSI is positioned near the 50 level, suggesting that short-term bullish and bearish forces are approaching equilibrium.
Overall, the recommended approach for gold trading tonight is to treat the market as being in a wide-ranging consolidation phase.
Trading Strategy for Gold
Short Position Strategy: Consider selling in the 4080-4082 range, with a stop-loss at 4105, targeting the 4031 area.
Long Position Strategy: Consider buying in the 4031-4029 range, with a stop-loss at 4012, targeting the 4063 area.
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