Gold prices consolidated just above a key support of $1,420
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- Gold prices have stabilised following a full downside reversal.
- All eyes are on Fed next week following GDP this week along with geopolitical noise.
Gold prices are hanging in the balance of geopolitics and the Federal Reserve. Markets are pricing in and out of a 50 basis point cut while US data continues to offer a backdrop from which observers are gauging the probability of the ranges of possibilities. Last week, there was two-way action in the greenback following conflicting expectations for a 50 basis point cut at the 1st July meeting.
Gold followed suit and rallied on the first inkling of a 50 basis point cut that came from Fed's John Williams and then totally retraced on comments from Fed's dove Bullard who said an easing now would be insurance against a slowdown, but favours a 25bp cut (rather than 50bp), and doesn't expect the Fed will be entering into an easing cycle. Consequently, spot prices fell from a high of $1,452.95 to a low of $1,420.35, ending the New York session at $1,425.35 and -1.49%
On the geopolitical front, besides trade wars that took a back seat on Friday, the news that Iranian guards seized the British Stena Impero tanker in the Strait of Hormuz was keeping the bears in check. News from this past Weekend has reported that the UK has convened two Cobra meetings to discuss its response, while also consulting other countries. Iran's ambassador to London, Hamid Baeidinejad, has urged the UK government to contain political forces seeking to turn the dispute into something larger. "UK government should contain those domestic political forces who want to escalate existing tension between Iran and the UK well beyond the issue of ships," Baeidinejad said on Twitter Sunday. "This is quite dangerous and unwise at a sensitive time in the region."
Gold levels
The symmetrical triangle is back into play with the price falling onto its top support line and back below the 1430 downside and key support level again. 1420/25 is key and below there, bears will then look for a run below the 1400 psychological level. The 23.6% Fibo of the latest swing lows and highs are located at 1398. Below here, we are looking down the barrel at $1,373/76 zone which meets the 19th June spike correction lows and the 38.2% Fibo of the same swing ranges.
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