Gold finds relief as tech rout fails to trigger heavy selling

Gold faced some downward pressure on Thursday during the selloff in technology shares. However, the selling has not reached the intensity of the liquidation seen in previous weeks.

The shift in both context and positioning could be the reason. A Democratic Congress is now in place, which will curb fiscal expansion and probably cap the rise in Treasury yields. Meanwhile, the Iran conflict continues and is expected to keep inflation expectations elevated.

That combination pushes real yields lower, particularly as the technology rout drags down growth expectations and nominal yields.

Gold positioning is also less overcrowded than early in the year. BofA's FMS survey had indicated back in July that gold was the most undervalued it had been since 2023, which could offer additional support to the metal.

Attention now turns to the US-Iran situation and the Federal Reserve. If Trump chooses to escalate the conflict, inflation expectations would climb while the growth outlook weakens, producing a stagflationary backdrop. That scenario is positive for gold.

If tensions de-escalate instead, a dovish repricing could occur as inflation fears ease, potentially supporting gold in the near term as well.

The US NFP report is due later. Weak data could further reduce the probability of rate hikes and spark a gold rally. A strong report would probably not alter the Fed's stance significantly, so any downward blip could be quickly reversed.

GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME

On the daily chart, gold has broken above a key downward trendline and pulled back to retest it. Buyers are likely to keep accumulating around these levels, with risk defined below the trendline, aiming for fresh highs. Sellers would need a break below the major upward trendline to open up new lows.

GOLD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME

On the 4-hour chart, support near 4,080 did not hold, but the price still bounced off the broken trendline. Buyers will probably want to see a move back above the broken support zone before piling in for a rally toward 4,500. Sellers would require a drop back below the trendline to extend the pullback toward the minor upward trendline around 3,960.

GOLD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME

On the 1-hour chart, a minor downward trendline is defining Thursday’s pullback. Sellers are likely to lean on this trendline, with risk above it, aiming for the upward trendline. Buyers would prefer a break higher to enter positions for a rally toward 4,500.

UPCOMING CATALYSTS

Friday wraps up the week with the US NFP report and the University of Michigan Consumer Sentiment survey.