Gold shows some life in a $100 rally to the highest since June 23
Gold has struggled badly since the start of the Iran war but it’s showing some signs of life today as it attempts to rebound above $4000. That big psychological levels was broken several times in the past week but with little follow through. That might indicate that buyers are adding at that level.
If so, it could be the start of a base.
The problem is, that’s a tough call to make with any kind of confidence. The war in Iran has effectively ended but gold hasn’t benefited at all.
More broadly, the US dollar has been strong this year as the AI spending investment boom boosts growth and pulls dollars into the United States. Today has been something of a reprieve with a softer non-farm payrolls report but it’s tough to envision a weak US economy from here given $700 billion in AI capex this year.
A more-sustainable bid for gold could come if we get the dollar weakening. USD/JPY is down 160 pips today as Japanese officials talk about stealth intervention in a change in tactics that highlights their unwillingness to allow the yen to hit fresh 40-year lows.
If the Iran peace extends we could start to see money flow back to Europe and emerging markets and that could undermine the dollar. I also sense better sentiment about global growth, which should lead to a trickle out of dollars. That said, the center of the AI boom is the United States (by far) and until that ends, it’s tough to bet against USD.
In terms of technicals, a bounce to $4400 is possible but we already tested that level in the bounce from the June gold breakdown and it didn’t last long, as gold then fell in 5 of 6 trading days. But if it can get above $4400, that could get some real attention.
This article was written by Adam Button at investinglive.com.