Gold Higher As USD Reversers

Gold prices are pushing higher today, benefiting from as a weaker US Dollar, on the back of news yesterday that Trump sees the Iran war ending within 2-3 weeks. Gold futures are up more than 5% off yesterday’s lows, bolstered by the sharp downturn in the Dollar. Whie it might seem counterintuitive that gold prices are rallying on risk-positive news, the implications for energy prices and USD are the key driver here. The prospect of a near-term end to the war is seeing energy prices dipping as traders anticipate a return to regular supply with the Strait of Hormuz likely to reopen fully once US military operations end. Trump also said that there is still a chance that the SU and Iran can agree a deal before the US pulls out which, if achieved, would be an even stronger boost for risk appetite with gold set to rally higher in that instance.

Bullish Gold Risks

With energy prices cooling and expected to push deeper if news flow remains supportive for an end to the war in coming weeks, USD is likely to drop lower as traders scale back hawkish Fed expectations. A quick end to e war could keep a potential US rate cut on the table this year. Traders had recently prices out a rate cut on the view that the war was likely to drag on and higher energy prices would send inflation soaring, forcing the Fed to hold rates steady and potentially even hike. However, if the US does pull out of Iran in coming weeks and energy prices revert lower, this could drastically change the picture, creating room for gold to move back up to highs as USD pushes lower.

Technical Views

Gold

The sell off in gold has stalled for now with price reversing back above the 4,548.82 level, fast approaching a test of 4,785.45 next and the retest of the broken bull channel lows just above. This is a key pivot for the market which, if broken, will turn focus back to 5,113.51 as the higher target.