Gold suffers worst selloff since January crash amid tightening financial conditions

FUNDAMENTAL
OVERVIEWGold bounced on Thursday
after a couple of de-escalatory looking news turned the risk sentiment around. Unfortunately, the mood
soured on Friday as Wall Street Journal reported that the US was sending
warships and thousands of additional marines to the Middle East despite Trump’s
assurances that he won’t put American boots on the ground in Iran. CBS news later doubled down
on the reports saying that Trump’s administration was making heavy preparations
for potential use of ground troops in Iran. Over the weekend, Trump
issued an ultimatum to Iran to reopen the Strait of Hormuz within 48 hours or face
strikes on key infrastructure. The ultimatum is set to expire this late
evening, but it doesn’t look like Iran is going to follow through at all, so
that will keep traders on edge.For now, tighter financial
conditions and the hawkish repricing are weighing on gold. This pressure is
likely to persist unless we get a clear de-escalation between the US and Iran.GOLD TECHNICAL
ANALYSIS – DAILY TIMEFRAMEOn the daily chart, we can
see that gold eventually broke out of the trendline around the 4,650 level and
extended the drop into new lows as the major trendline around the 4,000 level
came into sight. If the price gets there, we can expect the buyers to step in
with a defined risk below the 3,883 level to position for a rally back into new
all-time highs. The sellers, on the other hand, will look for a break lower to
increase the bearish bets into the 3,400 level next.GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAMEOn the 4 hour chart, we have
a downward trendline defining the bearish momentum. If we get a pullback, we
can expect the sellers to lean on the trendline with a defined risk above it to
keep pushing into new lows. The buyers, on the other hand, will look for a break
higher to pile in for a rally back into the 4,700 level.GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAMEOn the 1 hour chart, we have
another minor downward trendline defining the bearish momentum on this
timeframe. If we get a pullback, we can expect the sellers to lean on the
trendline with a defined risk above it to keep pushing into new lows, while the
buyers will look for a break higher to pile in for a rally into the next
trendline. The red lines define the average daily range for today. UPCOMING CATALYSTSTomorrow we have the US PMIs. On Thursday, we get the latest US Jobless Claims figures.
As a reminder, the focus is mainly on the US-Iran war, so keep an eye on the
headlines.
This article was written by Giuseppe Dellamotta at investinglive.com.

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