Gold Softer As USD Recovery Continues
USD Rally Hurts Gold Demand
Gold prices remain softer as we head into the weekend with the futures market having drifted steadily lower over the week. A resurgent US Dollar has been the main driver behind this patch of gold weakness. Continued uncertainty around the US/Iran peace process and risks of the ceasefire breaking down have seen a flood of safe-haven demand for USD this week, keeping gold prices pressured. While the standoff over the Strait of Hormuz continues, USD looks likely to remain supported, following oil prices higher, with gold vulnerable to a continuation lower accordingly.
Bearish Risks for Gold
Despite the ceasefire extension this week, USD and oil have remained bid, breaking the pattern of behaviour we’ve seen previously. This reflects greater scepticism from traders and the need for more concrete signs of progress. While this backdrop remains, and ceasefire risks are still seen, USD and oil should continue to grind higher with amplified buying seen in response to any news of rising tensions or faltering negotiations. On this front, the Strait of Hormuz remains the key flashpoint with the US continuing its blockade and Iran still blocking foreign ships. Not only does this keep tensions elevated but it also keeps global oil supply constrained, keeping crude prices skewed higher. With the inflationary risk from elevated energy prices seen as a big threat to the US economy, hawkish Fed expectations should keep USD turned higher with gold left falling consequently. Near-term, only a breakthrough in the peace process is likely to disrupt this dynamic.
Technical Views
Gold
The recent rally in gold failed into the retest of the broken bull channel lows with price now back below the 4,785.35-level. With momentum studies turning lower, focus is on a test of support at the 4,548.24-level next which bulls need to defend to prevent a deeper drop towards 4,389.24 below.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.