Stock market today: S&P 500 in weekly loss as trade war fears intensifyy
Analyzing the movements of the gold futures since the beginning of this week, I anticipate that the yellow metal has completely lost its safe-haven potential as it becomes habitual to bear the escalating tension between Iran and Israel despite a surge in potential U.S. involvement that has triggered the severity of this issue.
On the other hand, surging short-covering in the US dollar confirms its potential as a safe haven, as this limits the upside in gold prices if the U.S. wades into the Middle East conflict.
Undoubtedly, this conflict has heightened fears of broader regional instability, compounded by the spillover effects of the Gaza war but this has provided a new shift to US dollar and gold equations while we compare their potential as a safe haven, resulting in sharp recovery in US dollar and a sliding move in gold futures on Thursday while the investors weighed Federal Reserve Chair Jerome Powell’s cautionary tone on inflation.
I find that the gold futures started this week with a sliding move from the recent high at $3476, and continued to trade in a narrow range from $3419 to $3379 on the lower side couldn’t find a breakout above the upper band and finally have found a breakdown below the lower band on Thursday while trading currently at $3373.
Technical Levels to Watch
In an hourly chart, cold futures are trading below the significant support at 200 DMA at $3390, after the formation of a bearish crossover as the 9 DMA has pierced the 200 DMA while the 20 DMA and 50 DMA have come below the 100 DMA, indicating an advent of selling spree on Thursday which is likely to continue on Friday too if the gold futures find a breakdown below the immediate support at $3334 in today’s session.
In a daily chart, gold futures are trying to defend the immediate support at the 20 DMA at $3371, and if they find a breakdown below this, the next target will be the next support at the 50 DMA at $3326.
Undoubtedly, a breakdown below this significant support at 50 DMA will push the gold futures to test the next significant support at 100 DMA at $3147 in the next week, as the reversal seen in the US dollar will lessen the credibility of gold as the next haven.
Inversely, any bounce from the current levels will find stiff resistance at the immediate resistance at $3419 as the thick presence of big bears above this level makes the situation in favor of the bears as the potential surge in Iran-Israel could calm down since the potential outcome could be disastrous for the whole world while most of the nations have sufficient stock of nuclear weapons.
I anticipate that the thought of the destructive impact of this war will likely motivate global leaders to prefer a ceasefire at any cost while the whole world is already under threats of trade war tussles after the announcement of Trump’s new trade tariff policies.
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Disclaimer: Readers are advised to take any position in gold at their own risk as this analysis is based only on observations.