· Gold prices gained on Monday following a steep fall in the previous session as tensions in the Middle East and weaker financial markets supported the metal, while a stronger dollar kept a lid on gains.
Spot gold was up 0.2% at $1,427.26 per ounce as of 0322 GMT. The metal hit $1,452.60 in the previous session, its highest since May 2013, before closing 1.5% lower.
U.S. gold futures were up 0.1% at $1,428.50 an ounce.
· “Over the weekend, what happened between Iran and the United Kingdom is supporting gold prices today, ” said Brian Lan, managing director at dealer GoldSilver Central in Singapore.
“Also, equities are lower and at this point of time with geopolitical tensions and the Fed looking to cut rates, gold looks attractive, but people are worried about the stronger dollar.”
· Iran’s Revolutionary Guards said they had captured a British-flagged oil tanker in the Gulf after Britain seized an Iranian vessel earlier this month, ratcheting up tensions along a vital international oil shipping route.
Britain was weighing its next moves on Sunday, with few good options apparent as a recording emerged showing that the Iranian military defied a British warship when it boarded and seized the ship three days ago.
· Meanwhile, Asia stocks eased on Monday as investors reduced expectations of an aggressive interest rate cut by the Federal Reserve.
Likelihood of a smaller rate cut from the U.S. central bank lifted the dollar, making gold expensive for investors holding other currencies.
· The Wall Street Journal reported the Fed was likely to cut rates by 25 basis points when it meets later this month, and may make further cuts in the future given global growth and trade uncertainties.
· Expectations for a rate cut of half a percentage point at the Fed’s July 30-31 meeting edged out further on Monday to hit 14.5%, according to CME’s FedWatch tool, down from as high as 71% last week.
· “Geopolitical risks from the Persian Gulf could provide some support for the yellow metal, but the next major move will likely be if the Fed is dovish enough for markets,” Edward Moya, a senior market analyst at OANDA, said in a note.
· Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.72% to 820.49 tonnes on Friday from Thursday.
· Hedge funds and money managers raised their bullish stance in COMEX gold in the week to July 16, the U.S. Commodity Futures Trading Commission (CFTC) said in a report on Friday.
· Wall Street and Main Street look for gold to keep building on its recent gains, according to the weekly Kitco News gold survey.
The metal hit a fresh six-year high in screen trading after renewed dovishness from Federal Reserve officials Thursday.
“Gold has not only continued its upward move, it has clearly broken out to the upside,” said Phil Flynn, senior market analyst with at Price Futures Group. “A slew of dovish comments by Fed officials, along with rising geopolitical tensions with Iran, will keep gold on its upward trek.”
· GOLD TECHNICAL ANALYSIS
Gold prices put in a Bearish Engulfing candlestick pattern, hinting a top may be taking shape. Negative RSI divergence bolsters the case for a downturn. A daily close below rising trend line support at 1399.25 initially exposes the July 1 low at 1381.91. Alternatively, a break above the 38.2% Fibonacci expansion at 1447.89 targets the 50% level at 1468.27 next.
· Gold on Friday managed to defend a confluence support near the $1420 region - comprising of 100-hour SMA and 61.8% Fibo. level of the $1400-$1453 move to fresh multi-year tops.
The precious metal was now seen oscillating in a narrow trading band and hovered around 50% Fibo. level through the early European session on the first day of a new trading week.
Hence, it would be prudent to wait for a move beyond the Asian session swing high, around the $1430 region – also nearing 38.2% Fibo. level, before traders start positioning for any further near-term appreciating move back towards the $1440 supply zone.
On the flip side, a sustained breakthrough the above-mentioned confluence support, near the $1420 region might prompt some fresh technical selling and turn the commodity vulnerable to accelerate the slide back towards challenging the key $1400 psychological mark.
· Among other precious metals, silver rose 0.7% to $16.32 per ounce.
Platinum gained 0.6% to $848.88 an ounce and palladium climbed 0.4% to $1,511.84.
Reference: Reuters, Daily FX
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