Given enough time, I think that the gold markets continue to follow bonds and rates.
Gold
Gold has rallied during the trading session on Friday as interest rates have plummeted. This is directly related to the Middle East conflict and the fact that the Iranians have now said that as long as the ceasefire is in effect, the Strait of Hormuz will be open for all traffic. This of course has people hoping that we are in fact going to see some type of resolution to the conflict and therefore bonds just dropped rates rather aggressively.
This helps gold obviously because gold is a non-yielding asset, so therefore people look at it through the prism of cost of ownership sometimes. With this, I think you have a situation where a lot of traders are going to be looking to try to push gold higher, maybe as high as $5,000 in the relatively short term. Given enough time, it would not surprise me at all to see this market break above there.
Geopolitical Sentiment and Technical Outlook
This is a very bullish market until we started to see rates spike right at the beginning of the war. If that goes away, then we could see something similar to what happened in the S&P 500 where we return to where we were pre-conflict and in fact since then we’ve broken even higher.
It’ll be interesting to see how this plays out. Traders will have to pay attention to speakers from the Federal Reserve and other central banks to try to get an idea as to where things are going. But as things stand right now it certainly looks like gold’s going higher.
Short-term pullback should see support near the 50-day EMA and then again at the $4,600 level. If we give that up to the downside it would be a very ugly turn of events.