July 8, 2027. The gold market is back in action in the early trading session on Wednesday morning when the price managed to climb back above the $4,100 level. However, the momentum of this rebound is seen to be quite limited due to the latest geopolitical tensions between the US and Iran that have peaked again, in addition to investors who are now taking a wait-and-see attitude ahead of the announcement of the Fed Meeting Minutes tonight.
Two Main Factors of the Gold Market Today:
1. Ceasefire Destroyed, Strait of Hormuz Turbulence!
Tensions in the Middle East are back on the rise after the interim peace plan between the US and Iran reportedly collapsed:
US Attacks Iran & Blocks Oil Exports: The US military launched a new wave of attacks on Iran on Tuesday and revoked Iran's oil export licenses after three oil tankers were attacked in the Strait of Hormuz.
Iran Retaliates: Iran's Islamic Revolutionary Guard Corps (IRGC) claimed to have attacked 85 US military facilities in Bahrain and Kuwait, and shot down a sophisticated US drone, the MQ-9 Reaper.
Impact on Gold: The resurgence of the risk of war has pushed up crude oil prices and sparked global inflation concerns. This has provided safe haven support for gold, but at the same time, the US Dollar, which also acts as a safe haven, has kept gold from rocketing higher.
2. Fed Meeting Minutes (FOMC Minutes) in Focus
Traders are now fully focused on the US Federal Reserve's (Fed) June meeting minutes for clues on the direction of interest rates.
Although recent US economic data has been relatively lukewarm (ISM services sector data and Nonfarm Payrolls were weak), inflationary risks due to oil prices have led the market to expect the Fed to remain hawkish.
According to the CME FedWatch Tool, expectations for the Fed to raise interest rates in September have now jumped to 63%, compared to just 57% on Tuesday. This expectation of an interest rate hike is usually bearish for gold as it strengthens the US Dollar.
XAU/USD Technical Analysis: Consolidation
Based on the current daily chart structure, XAU/USD is moving in a very large hedging consolidation phase. Two ‘crucial’ price levels that traders must watch are:
Main Ceiling (Resistance): $4,257.675
Main Floor (Support): $4,030.090
Trader Note: Gold needs a solid daily candle close above or below one of these levels to determine the direction of the next major trend. As long as the price plays within this range, the market is expected to move sideways.
Gold is currently at a very sensitive crossroads. Geopolitical sentiment supports the upside, but expectations of aggressive Fed action are pulling prices down.
We advise traders to remain disciplined in risk management tonight. The market will be very aggressive (volatile) once the Fed meeting minutes are released, coupled with surprising news from the Middle East that could come out at any time.
Do you think gold tonight can break to $4,257.675 or will it dump back below $4,030.090 after the Fed minutes come out? Try dropping your comments below!
