The commodity market is in a real mess this morning after falling nearly 2%. Gold (XAUUSD) is currently languishing around $4,450. This violent selling momentum shows the market's fear is very strong, while the US Dollar is proudly standing at a six-week high.
The FOMC meeting minutes early this morning will be the defining moment.
Trump Threatens to Strike Iran Within 48 Hours
President Donald Trump has once again shaken the world with a stern warning to launch another attack on Iran within "two or three days" if Tehran continues to stubbornly refuse the concessions he wants.
Although Trump managed to postpone the previous attack at the request of Gulf allies, this latest threat sends a clear signal to the market that there is no easy way out of this Middle East war.
The impact of the closure of the Strait of Hormuz has caused crude oil prices to soar unabated. In turn, global inflation expectations have skyrocketed, sparking panic in the bond market as investors have begun to sell their holdings in search of protection.
US Bond Yields Break Record in 2007: Fed ‘Rate Hike’ No Longer a Myth
What is happening in the bond market right now is something very scary for gold holders. The US 30-year bond yield has skyrocketed to its highest level since July 2007, approaching 5.20%, while the 10-year benchmark has easily surpassed the critical level of 4.50%.
This crazy jump in yields is happening because the market is now starting to place an increasing bet that the Federal Reserve (Fed) will have to raise interest rates again by December in order to curb oil inflation.
This increasingly hawkish Fed expectation is the main ingredient for the US Dollar to continue to climb. Gold, which does not provide any interest returns, has now lost all its appeal, and its status as a safe haven has been completely usurped by the Greenback.
MARKET TECHNICAL STRUCTURE
From a technical perspective, the daily structure of XAUUSD shows absolute dominance by the bears.
Current Bias: Bearish
Resistance Ceiling ($4,794 – $4,689): Gold’s rise is blocked by moving average resistance. The 50-day (MA) at $4,689 acts as a strong supply zone. Traders are now treating any small increases to this area as mere price corrections before new selling is entered (sell on rally).
Critical Key Support ($4,359): The last price resistance is at the 200-day MA around $4,359. A daily close below $4,359 would end gold’s long-term bullish era.
MARKET EXPECTATIONS
👉 Scenario A: Hawkish FOMC Minutes & Trump Hits the Attack Button (Gold Slumps Freely)
If tonight’s FOMC minutes reveal Fed members are seriously discussing the need for another rate hike, coupled with news of a physical attack on Iran, the Dollar will dominate completely. Bond yields will jump higher, and gold will crash mercilessly through $4,359.
👉 Scenario B: Fed Starts to Hesitate & There’s a Ray of Peace (Gold Bounces Technically)
If the FOMC minutes show the Fed still wants to take a wait-and-see approach and is worried about economic growth, or if Trump suddenly softens his tone, the Dollar will experience profit taking. Gold, which is already in a near-oversold state, could make a quick technical rebound to retest $4,689.
Highlight
FOMC Minutes (Tonight): This is the main event that the entire market is waiting for this week. Traders want to dissect every sentence to see how “harsh” the US central bank’s tone is on the current inflation issue. Any surprise interest rate hike will shake the market aggressively.
My advice to all fellow traders: the market is not the place to play with emotions or try to be a hero stopping a tanker truck going down a hill.
Higher for longer sentiment and Trump’s war threats are the realities that are dominating the market. Guard your margins, let tonight’s FOMC minutes show the way before we jump into the market.
