FX.co ★ Gold Misses Part of Yesterday's Gains

The situation in the gold market remains precarious. On the one hand, gold is still holding onto part of yesterday's gains and is trading near $4,521 per ounce. The impetus for a 1.4% increase the day before came from Trump's statement that the U.S. is in the "final stages" of the conflict with Iran. In response, the dollar and Treasury yields fell, further supporting the metal.

The logic here is straightforward. A potential end to the war and the reopening of the Strait of Hormuz would reduce energy price pressures on inflation and, therefore, the need to keep rates elevated for an extended period. For gold, which does not yield income, this is a positive scenario, as once the situation in the Strait of Hormuz stabilizes, the macroeconomic factors weighing on gold are likely to diminish—and prices may find a bottom. If the route remains closed for an extended period, concerns will shift toward stagflation, a period when precious metals historically perform well.

However, investor optimism remains subdued, and there are good reasons for this. The rhetoric from both sides of the conflict changes too frequently to make serious bets on it. The minutes from the May FOMC meeting, published recently, reminded us that most committee members are prepared to consider a rate hike if inflation continues to sustainably exceed 2%. The yield on 10-year Treasury bonds also remains near its yearly high. Since the start of the war, gold has lost about 14% and has been trading within a narrow sideways range—the market clearly cannot decide which scenario will prevail.

Silver has decreased by 0.2% to $75.73 per ounce. Platinum and palladium also traded lower.

Given the current technical picture, gold buyers need to reclaim the nearest resistance at $4,546. This will allow for targeting $4,607, above which it will be quite challenging to break through. The furthest target will be around $4,656. If gold falls, bears will attempt to take control at $4,481. If they succeed, a breakout from this range will deal a serious blow to the bulls' positions and push gold down to a low of $4,432, with the prospect of reaching $4,401.