Gold prices are seeing better bidding action today with the futures market in the green after plunging to fresh one-year lows on Friday. The slide in prices at the end of last week comes amidst the recent surge in energy prices and hotter US inflation, keeping Fed tightening expectations well-seated. Against that hawkish backdrop, gold prices are certainly vulnerable to fresh downside and we could see heightened volatility this week given the US midterms tomorrow and the US labour market update on Friday.

US Midterms

With regard to the US midterms, alongside the USD volatility we might see in response to any big shift in the political landscape, perhaps the bigger focus is on whether Trump will launch a fresh offensive against Iran after the elections. There has been plenty of speculation recently amidst reports that Trump has ordered attack plans to be prepared and has been briefed on options. If he does reignite the war with Iran, this could be heavily bullish for USD as oil prices soar once again, putting fresh pressure on gold prices. However, if Trump refrains from fresh attacks and, particularly if there is any news that the US and Iran are to resume negotiations, this should be firmly bearish for oil/USD, allowing gold room to recover higher.

Technical Views

Gold

The sell off in gold has seen price breaking down below the 3,940.24 level and with momentum studies bearish, focus is on a continuation lower towards the 3,715.96 level next. If bulls can reclaim the broken 3,940.24 level, 4,085.75 will be the next resistance to watch.

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Tagged in: #gold #xauusd #fed #trump #iran

Written byleos James Harte

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.