Gold Breaks Key Trendline After Vance Comments on Iran War

Gold added to its gains on the previous day following a breakout above a downward trendline that had been in place since September.

Oil prices dropped, and this triggered the breakout, as US Vice President Vance linked the war with Iran to the Republican Party's significant midterm election losses. A post on X from him bolstered the view that the Trump administration might look for a way out of the conflict rather than intensify military action.

It should also be noted that a Democratic-controlled Congress will likely limit further tax cuts, defense spending, and overall fiscal expansion. This supports gold as it constrains increases in Treasury yields and the US dollar on expectations of fewer rate hikes.

Gold could also be supported if Trump chooses to intensify the war with Iran, since inflation expectations would climb together with a deteriorating growth outlook due to fiscal limits, resulting in stagflation.

The US NFP report is due tomorrow, but it is unlikely to significantly alter the Fed's stance since strong labor data have become the norm. Attention will probably stay on US-Iran talks, though both escalation and de-escalation appear to be positive for gold at this stage.

Gold Technical Analysis for the Daily Timeframe

Gold rose above the crucial downward trendline on the previous day, setting up a potential advance to 4,700. Buyers should keep piling in at these levels, using a stop below the trendline, while targeting fresh peaks. Sellers, however, would require a price move below the key upward trendline to enable a move to new lows.

Gold Technical Analysis for the 4-Hour Timeframe

There is a minor support zone around 4,080. In the event of a pullback, buyers are likely to step in near this support, with a risk below the broken trendline, to continue pushing to new highs. Meanwhile, sellers will be watching for a move back below the trendline to set up a decline toward the major upward trendline, eventually aiming for a breakout.

Gold Technical Analysis for the 1-Hour Timeframe

A minor upward trendline defines the bullish bias on this timeframe. Aggressive buyers will likely rely on this trendline, with a stop below it, to push toward new highs. Sellers, on the other hand, will target a break below the trendline to extend the pullback to the 4,080 support and then aim for a break below that level.

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Today we get the latest US Jobless Claims figures. Tomorrow, we conclude the week with the US NFP report and the University of Michigan Consumer sentiment survey.