Gold Rallying on Thursday

Gold prices are starting to push higher again this week with the futures market now up around 5.5% off the week’s lows. The bullish reversal comes amidst rising hope that a US/Iran peace deal is on the horizon, which has been cheered by risk assets this week. While typically, risk-positive market phases would see USD coming under pressure, gold is being support by the drop lower in USD. Ove the course of the war so far, gold prices have been weaker, outshined by the strength we saw in crude and USD (as the preferred safe-haven). Consequently, with crude and USD now weakening amidst rising optimism that the conflict can be brought to an end, gold demand is soaring.

US/Iran Headlines Key

Looking ahead, focus will be on incoming US/Iran headlines. The week started on a tricky footing with news of fresh Iranian attacks on US ships in the Strait of Hormuz, followed by US retaliation, suggesting the ceasefire was at risk of collapsing. However, both sides have since walked back their hostilities and the Iranian Foreign minister on Tuesday said hat peace talks were progressing well again. There is also a growing view that the US is leaning on China to help deliver a peace deal with Iran, which could come as soon as in the next couple of weeks, ahead of Trump’s meeting with Xi. If traders start to get a stronger sense that a deal is coming, USD has plenty of room to fall further, meaning gold prices could track firmly higher in coming weeks.

Technical Views

Gold

Following the bounce off the 4,548.82 level, price is now fast approaching a test of the 4,785.35-level next with the bear trend line from YTD highs just above. Plenty of resistance overhead but if bulls can breach that zone, focus will turn to the 5k level next and structural resistance above at 5,113.51.