Safe-Haven Bid Fades as Gold Market Awaits Iran Talks
LONDON (February 24) Gold is edging lower on Tuesday after retreating from its highest level in a month. The early price action suggests a four-day rally may be at risk. With uncertainty building over President Trump’s tariff plans and the U.S. dollar strengthening, it looks as if profit-taking is weighing on prices today.
Gold has been rallying since last Wednesday when the situation between the United States and Iran started heating up. Tense negotiations between the two countries, coupled with President Trump’s 10-to-15-day window before he would consider bombing Iran, seemed to set in motion a wave of safe-haven buying from last week’s low at $4842.60 to this morning’s high at $5250.00.
Thursday’s Iran Talks Could Be a Game Changer
Negotiations between the U.S. and Iran are set to resume on Thursday, just three days before the clock starts ticking on potential military action. We’re expecting volatility to pick up on Thursday and into the weekend because we’re looking at a binary event with two possible outcomes. Iran has to agree to a deal on Thursday or face the start of a bombing campaign over the weekend.
In my opinion, the risk of possible military escalation in the Middle East is rising, so buying gold as a hedge against the unknown is justifiable. We don’t know anything about a potential counter-attack on U.S. soil. We don’t know if Iranian allies China or Russia will get involved. There are many risk factors that can be hedged with a gold position.
The key sticking point in the negotiations is that the United States wants Iran to abandon its nuclear program, but Iran is refusing to budge. Gold prices are likely to retreat if a framework or an actual deal is struck on Thursday. If no deal is reached, speculators may buy aggressively ahead of the weekend.
Tariff Calm Takes Wind Out of Gold’s Rally
The threat of a war between the U.S. and Iran is not the only factor supporting gold. Traders are also monitoring Trump’s order for new tariffs on imported goods. While the initial reaction from gold traders was bullish because of the uncertainty created by the move, conditions seem to have calmed without any major outrage from the global community. This may have been the key factor encouraging investors to book profits this morning.
Slow and Steady Uptrend with Buy the Dip Potential
Daily Gold (XAU/USD)
Technically, spot gold is in an uptrend as defined by the daily swing chart and the 50-day moving average at $4743.04. A trade through $4842.60 will change the swing chart trend to down. A trade through the intraday high at $5250.00 will signal a resumption of the uptrend.
The first line of support is the retracement zone at $5143.89 to $5002.31. The second support zone is $4744.34 to $4541.88.
There is nothing uncharacteristic about the current rally. It appears to be slow and steady, like the one last year before it went parabolic, so we’re not worried about it being overpriced. With the trend up, we’re more interested in seeing whether investors have shifted to “buy the dip” mode, which we could see today if buyers jump in on a pullback into the retracement zone at $5143.89 to $5002.31.
FXEmpire
