Key Points
- $2750 has held up as robust topside resistance for gold.
- As long as price remains over $2712, a bullish bias for gold is warranted.
- Recession, politics, and geopolitical tensions are the current market drivers for gold.
Market Overview
The gold market has been topsy-turvy since the key $2,750 area was tested. Following a bullish break to $2,758, a significant reversal to $2,720 has come to pass. With a vacant economic calendar for the remainder of the week the XAU/USD may be headed for a period of consolidation.
On the other hand, the US election and geopolitical uncertainty may send bullion to a test of the vaunted $3,000 level.
The Economic Calendar
The remainder of the trading week features a modest economic calendar. However, there are a few news items of which to be aware. Two worthy of note are the New Home Sales (Thursday) and Durable Goods Orders (Friday).
On their face, these events are peripheral at best. But bond yields are up, suggesting that lenders are anticipating a pullback in the money supply. Accordingly, this should send consumption down as consumers prepare for a possible recession. If these two metrics come in lower than expected, be ready for a rally in gold as traders brace themselves for the worst.
Bottom line: as the odds of a recession increase, the price of gold will also rise. Although our economic calendar is muted, weak New Home Sales and Durable Goods Orders will boost the chances of recession.
XAU/USD: Technical Outlook
In a trade idea from earlier this week, we pointed out the importance of the $2,750 area for the XAU/USD. This assertion has proven true as gold experienced heavy two-way action in this zone.
At press time, the sellers have the upper hand. Gold is off 1.25% for the session, plunging more than $40 from intraday highs. Now, the Daily 38% Fibonacci Retracement (2712.90) is acting as downside support.
The technical market read is simple: a bullish bias is warranted, with a strong bullish bias appropriate as long as price remains above the Daily 38% threshold.
Fundamentals
There are two key fundamentals to watch if you’re trading gold: the US Election and Israel/Iran. With just over two weeks until Election Day, Republican candidate Donald Trump is surging in the polls. At the political wagering website Polymarket, Trump holds a near 70/30 edge over Democratic candidate Kamala Harris. Any reduction of political uncertainty is a bearish market driver for gold.
The world awaits Israel’s retaliation against Iran. It has been several weeks since Iran launched an airstrike on Israeli installations. Israel has sworn a significant response to the strike. At press time, this has yet to develop. Be sure to watch this story, as it can drive gold higher.
It’s been an epic week on the markets. Gold has been no exception; the coming 48 hours will likely be active as traders price recession, politics, and geopolitical pressures. It’ll pay to be ready for anything ahead of the weekend break.
Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.
