Gold bounces as Iran tensions ease, then pauses; US CPI next catalyst

CORE FUNDAMENTALS

In the closing days of last week, gold staged a sharp recovery after Donald Trump said he would not launch strikes on Iran ahead of November's elections, adding that the two sides have held constructive talks. The relief rally pushed bullion higher while Treasury yields and the dollar retreated.

Iran said during the weekend that the American answer to its bid to have the Strait of Hormuz reopened was not enough. Tehran had set out seven conditions for the return of normal shipping traffic within seven days and noted that some issues were still outstanding. Talks aimed at bridging the gap remain under way.

Going forward, the market's attention turns to US-Iran developments and Wednesday's CPI release. If the core reading beats expectations, the likelihood of a Fed rate increase in October would rise and weigh on gold. A subdued figure, however, would probably ease those rate concerns even more and offer the metal further support.

GOLD TECHNICAL ASSESSMENT – DAILY CHART

On the daily chart, gold (CFD contract) is trading close to a descending trendline. Sellers are expected to enter around that line, keeping their defined risk above it, as they aim for a decline toward 3,885. Buyers, for their part, would need to see a break above the trendline to enter, targeting a rally toward 4,700, with 4,500 as the first goal.

GOLD TECHNICAL ASSESSMENT – 4 HOUR CHART

The four-hour chart shows a minor ascending trendline that has shaped the latest pullback. If the price slips back to that line, buyers are likely to defend it, with risk defined to the downside, seeking a move above the descending trendline and a continuation of the advance toward 4,400. Sellers, meanwhile, would be looking for a breakdown below the descending line to enter and push the price down to 3,885.

GOLD TECHNICAL ASSESSMENT – 1 HOUR CHART

There is little to add on the one-hour chart: buyers would do best to wait for a pullback to the rising trendline or a breakout above the falling line, while sellers will watch for short setups at the descending trendline or on a break of the ascending one. Today's average daily range is marked by the red lines.

CATALYSTS TO WATCH

The US CPI report lands on Wednesday, with the US PPI, US retail sales and the latest US jobless claims figures due on Thursday.