Gold favourably positioned amid US-Iran tensions and CPI expectations

Gold is hovering near recent peaks as the market waits for fresh news on US-Iran relations and Wednesday's US CPI data.

In an interview with CNN, Trump stated that the US would probably not conduct new military operations against Iran if talks yield meaningful progress on Tehran's nuclear activities and the reopening of the Strait of Hormuz. He emphasised, though, that any move to refrain from further attacks hinges on Iran agreeing to a sufficiently robust accord, and that the US is prepared to act militarily if required.

US Secretary of State Rubio characterised negotiations with Iran as having advanced little, calling Tehran's conditions unacceptable, while reiterating that Washington remains willing to seek a diplomatic solution.

On the CPI front, Wednesday's figures could lock in a rate increase at the December FOMC meeting, with traders already attaching a 79% probability to such a move.

A strong CPI reading could cause gold to dip sharply, though losses would probably be bought back. The reasoning is that rate hikes at this stage should add further downward pressure on equities and long-dated Treasury yields given growth worries. A soft report, by contrast, would likely spark an immediate rally on a dovish repricing.

In the current environment, if Trump chooses to step up the conflict, inflation expectations would climb together with a worsening growth outlook, producing a stagflationary scenario that should be favourable for gold. At the same time, a de-escalation could trigger a dovish repricing on reduced inflation concerns, which should also support gold in the near term.

GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME

On the daily chart, gold is consolidating above the broken trendline. Buyers are likely to keep adding positions near these levels, with a clearly defined risk below the trendline, aiming for fresh highs. Sellers, meanwhile, need a break below the major upward trendline to pave the way for new lows.

GOLD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME

On the 4 hour chart, there is a minor support zone around 4,040. Should another pullback occur, buyers are expected to step in near support, with risk defined below the broken trendline, targeting the 4,500 level. Sellers will look for a break below support to extend the pullback toward the minor upward trendline.

GOLD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME

On the 1 hour chart, another minor upward trendline could act as support. Buyers may wish to split their positions in case the price breaks the trendline and later bounces near support. Sellers need to see a break below support to open the door for new lows.

UPCOMING CATALYSTS

Wednesday brings the US CPI report. Thursday sees the latest US Jobless Claims numbers. Friday wraps up the week with US PPI data.