Gold fails to sustain the breakout as prospects for a quick end to the war fade

[Forex News]

FUNDAMENTALOVERVIEW

Gold broke out of its rangeon Wednesday as sentiment improved after Trump said on Tuesday that “the warcould be over soon.” That prompted traders to scale back hawkish interest-rateexpectations, which in turn put pressure on Treasury yields and the US dollar.

However, the positive mooddidn’t last long. Gold quickly fell back into the range after reports that USintelligence had detected signs Iran might be deploying mines in the Strait ofHormuz. Oil prices began rising again, and the hawkish bets returned.

Yesterday, Trump told Axiosthat there’s practically nothing left to target in Iran and that the war willend soon. Unfortunately, the market no longer seems to be buying the “warending soon” narrative. His comments were largely ignored, as traders now wantto see a clear and definitive end to the conflict.

In the short term, therelief from a definitive de-escalation should be positive for gold, sinceexpectations for rate cuts would likely return. What happens next, however,will largely depend on upcoming US data.

If the data starts to showsigns of weakness, the market will probably increase the bets on rate cuts,which should push gold to new highs. On the other hand, if the data continuesto come in strong, gold will likely stay rangebound or potentially move lower.

GOLD TECHNICALANALYSIS – DAILY TIMEFRAME

On the daily chart, we cansee that gold has been consolidating around the 5,100 level with tradersawaiting new catalysts for the next direction. There’s not much we can gleanfrom this timeframe, so we need to zoom in to see some more details.

GOLD TECHNICAL ANALYSIS – 4HOUR TIMEFRAME

On the 4 hour chart, we cansee more clearly the consolidation between the 5,000 support and the 5,200resistance. The price briefly probed above the resistance but eventually returnedinside the range. The market participants will continue to play the range bybuying at support and selling at resistance until we get a breakout on eitherside.

GOLD TECHNICAL ANALYSIS – 1HOUR TIMEFRAME

On the 1 hour chart, there’snot much we can add here as the sellers will likely step in around the resistancewith a defined risk above it to keep targeting the support, while the buyerswill look for a breakout to pile in for a rally into new highs. The red linesdefine the average daily range for today.

UPCOMING CATALYSTS

Today we get the latest US Jobless Claims figures. Tomorrow, we concludethe week with the US PCE price index, the University of Michigan ConsumerSentiment survey and the Job Openings data. As a reminder, the market focusright now is solely on the US-Iran war, so the data might not matter much.

This article was written by Giuseppe Dellamotta at investinglive.com.

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