Early Monday morning, the commodity market was surprised by the aggressive move of gold (XAU/USD) which launched a counterattack, erasing last week's sadness to rocket back towards the psychological level of $4,600.
News of the US-Iran peace talks forced the Dollar index to fall for a while. However, despite the enthusiasm of 'Retail Traders' hunting for 'Buy', the market atmosphere is actually still filled with a very thick sense of doubt.
This revival momentum feels fragile, investors seem reluctant to fully release the bullet because they know, behind the scenes, the shadow of a US interest rate hike has not yet disappeared.
Strait of Hormuz Peace Bait Shakes Oil Markets, Dollar Falls in the Asian Session
The main trigger for the 1.5% jump in gold prices to $4,575 this morning was a series of media reports over the weekend that Washington and Tehran are getting closer to sealing a 60-day ceasefire agreement.
US Secretary of State Marco Rubio, who said there would be “good news” about the reopening of the Strait of Hormuz, has managed to send crude oil prices down more than 5%.
This sharp drop in energy prices is very important for global markets because it eases inflation fears that have been severe due to the war since February. As inflation fears subside, the absolute ‘safe haven’ appeal of the US Dollar fades for a while, opening up space for precious commodities such as gold and silver to breathe again from selling pressure.
Investor Doubt
While the market is celebrating this atmosphere, Donald Trump was quick to calm the situation by stating on social media that he will not “rush” to sign a deal since the issue of Iran’s nuclear program and control of the Strait is still not finalized.
We at Intraday assess that this reaction to gold is actually still quite bland compared to the scale of the peace news. Institutional traders (hedge funds) and investors are refusing to panic or FOMO buy because they have forgotten about Trump’s announcements which often end in failure.
The Era of New Fed Chairman Kevin Warsh and the December Rate Hike Bet
Another harsh reality that is holding gold back from soaring freely is the money market expectation that is now almost 100% certain that the Federal Reserve will have to raise interest rates by December due to the impact of the protracted war.
The presence of Kevin Warsh as the new Fed Chairman who took the helm adds to the puzzle of the central bank's tactics. Big investors are now closely watching for any early signs of whether Warsh will bring a more aggressive (hawkish) approach.
As long as this prospect of high interest rates exists, non-interest-bearing assets like gold will always face selling pressure whenever it tries to climb higher. Furthermore, Monday's trading volume is very thin due to the Memorial Day holiday in the US, which means that today's movement could simply be a liquidity manipulation.
Gold Market Technical Analysis
From a technical perspective on the daily chart, the XAU/USD landscape shows that the current movement is just a price correction (corrective bounce) in a downtrend that is still intact.
Current Bias: ‘Neutral to Bearish’ (Short-term bearish trend still dominant)
Sturdy Resistance Zone ($4,608.80 – $4,658.06): Gold is currently approaching a resistance area tightly controlled by the 21-day MA at $4,608.80 followed closely by the 50-day MA around $4,658.06.
Support Bastion ($4,382.09): If the attempt to break through $4,610 fails and Trump suddenly cancels the talks, gold risks a quick reversal. The support area is currently centered around the mid-$4,300s, with the 200-day MA at $4,3877.370.
👉 Scenario A: A Formal Peace Deal Is Mandated
If Iran and the US sign a formal ceasefire document in the near future, oil prices will crash. This would eliminate the need for the Fed to raise interest rates, trigger a major fall in the Dollar, and drive gold prices higher.
👉 Scenario B: Peace Talks Fail / Nuclear Issues Re-Emerge
If Trump announces that talks have failed due to Iran's nuclear stubbornness, the market will immediately be hit by a risk-off panic. Oil prices will surge again on fears of a Strait of Hormuz blockade, the Dollar will be greedily hunted as a safe haven, and gold will be decapitated again.
US Geopolitical News Headlines – Iran & Kevin Warsh Announcement:
As the US bond and stock markets are closed today for Memorial Day, there is no data that will act as a price catalyst.
Traders and investors will be fully focused on the developments in the international media and any first remarks from the new Fed Chairman, Kevin Warsh. Any statements from him on the economic outlook will be scrutinized as a guide to the direction of the USD.
