Gold Above $4,000 for now: US Inflation and Iran Tensions in Focus
The markets last week felt the full effect of the midterm elections and the Democratic wins in the house and the senate. The stock market felt the full force of a market selloff while most safe haven assets rose in value. Economists also note that volatility after the midterms was slightly higher than the recent average reaction.
However, investors are now turning their attention to the Iran conflict, oil prices, and inflation. Economists expect the US inflation rate to rise from 3.7% to 3.9%, making a December rate hike close to certain.
Gold Attempts To Maintain Bullish Momentum
The inflation rate, as well as the Middle East conflict, will have a considerable impact on Gold prices. After a sharp decline in October, Gold prices are improving due to their safe-haven status and the midterm elections. The price of Gold has risen above the $4,000 psychological level and is so far maintaining a price above this level.
On the 1-minute chart, Gold is experiencing heightened intraday volatility following its recent recovery. On these smaller timeframes, the price is showing strong bearish momentum and strength, creating a strong bearish bias. The price is also trading below key moving averages and forming clear breakouts.
However, on the 30-minute chart, the technical outlook remains cautiously bullish, although a slight further decline will weaken all bullish indications. In order for bullish signals to strengthen, the price needs to rise above $4,116.00. Below $4,090, the price is likely to become more bearish.
Only on the 4-hour chart, Gold is showing real signs of a bullish recovery, supported by higher lows and improving momentum. The RSI has recently been around 63, indicating positive momentum without reaching traditionally overbought territory. However, the broader trend remains vulnerable following recent selling pressure.
The issue for Gold is the decline in the stock market, demand for bonds, and the strength of the US Dollar. While inflation is likely to rise and the Federal Reserve continues increasing interest rates, any upward price movement remains restricted. The US Dollar continues to trade above the 100.00 level, which is negative for Gold.
If the US inflation rate or core inflation data come in higher than the market's current expectations, Gold is likely to decline back towards its support levels. Currently, 80% of market participants believe the Federal Reserve will hike interest rates in December 2026.
Crude Oil Declines on Bearish Trump Comments
Crude oil prices are trading close to $90.00 per barrel, which remains elevated but much lower than in recent weeks. The lower oil prices go, the more positive it is for Gold. The key influencing factor for oil prices will remain the Middle East conflict.
US President Donald Trump has indicated that further military strikes against Iran are highly unlikely, provided negotiations over Tehran’s nuclear programme and the reopening of the Strait of Hormuz continue to progress. Speaking to CNN last night, Trump emphasised that avoiding military action depends on Iran agreeing to a strong diplomatic deal.
However, Marco Rubio, the Secretary of State, was less optimistic. Mr Rubio said that he wouldn’t say the US is on the verge of a breakthrough in talks on ending the conflict with Iran. If tensions escalate again, oil prices could rise above $100 per barrel, pressuring inflation and Gold prices.
Technical analysis is less viable for Oil prices due to the nature of the asset. However, if the price falls below $89.16 per barrel, momentum indicators will point towards the price declining further. Key support levels for the asset are $87.00 and $80.20 per barrel.
Key Takeaways:
- Gold holds above $4,000 as safe-haven demand supports prices following the US midterm elections and heightened stock market volatility.
- Gold’s technical outlook remains mixed, with bearish momentum dominating shorter timeframes while the 4-hour chart indicates a potential bullish recovery.
- US inflation could rise to 3.9%, strengthening expectations of another Fed rate hike in December, potentially limiting Gold’s upside.
- Oil prices remain sensitive to US-Iran negotiations, with crude trading near $90 per barrel. Renewed military escalation could push prices above $100, increasing inflationary pressures.
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Michalis Efthymiou
Michalis Efthymiou has extensive experience within the financial sector throughout the UK and Europe. After spending 5 years in London where Michalis operated as a financial advisor and an underwriter, he then entered the market analysis sector.
Additionally, he held training sessions and seminars in over seven countries across the globe and is now focused on providing investors with the required guidance to operate within the market with full confidence.
His teaching methods are based on technical analysis, fundamental analysis and order flow analysis, as well as how to view the market from an institutional angle.
