Gold Retests: Breakout or Reversal?
Gold opened at 4,529 on Monday, May 25, and briefly reached a high of 4,579, erasing last week's modest decline. This rise aligns with a shift in sentiment following signs that the US and Iran are moving closer to a deal on Hormuz.
The main fundamental driver today is geopolitical headlines: the prospect of a deal potentially re-opening energy flows through the Strait of Hormuz is considered to ease pressure on energy prices, thereby alleviating inflation concerns. This provides room for investors to increase their exposure to gold, although the market response is said to be relatively muted.
The reason the movement hasn't exploded is the credibility of the headlines: the market has seen several announcements regarding Iran "hang in the balance" or without concrete results. Therefore, buying impulses tend to emerge, but position sizes are more cautious while awaiting further evidence.
On the bearish side, gold remains under the shadow of expectations of higher US interest rates. In the previous narrative, the Iran war boosted energy prices and led market participants to increase bets on interest rate hikes, with money markets pricing in the near certainty of the Fed starting to raise rates in December. The mechanism: Higher interest rates increase the appeal of interest-bearing assets and typically put pressure on non-yielding gold.
In context, although gold rebounded today, it is still said to be down around 13% since the conflict began in late February. This means that an intraday gain like today's is more easily interpreted as a "headline-sensitive rebound" rather than a confirmed trend reversal.
Technically, intraday gains like 4,579 are the closest resistance levels due to the session high, while 4,529 is initial support due to the opening level. As long as the price holds above the opening level, the intraday bias tends to remain constructive; if it loses that level again, the market usually interprets it as a sign that the rally is losing steam.
The most important variables to monitor today follow the same narrative: developments on the details of the Hormuz agreement (not just statements), and any rapid changes in US interest rate expectations, as reflected in dollar/yield movements. Furthermore, investors will also be looking for clues about policy direction under new Fed Chairman Kevin Warsh, as market perceptions of the Fed's "tightness" going forward remain a major determinant for gold. (asd)
Source: Newsmaker.id
