Gold price reversal resembles blow-off top into escalating geopolitical tensions

Gold soared to fresh record highs on Friday before unwinding dramatically into the close
Gold has been mildly bid on Monday following Iran’s attack on Israel
Geopolitics is not the only factor underpinning gold’s sizzling start to 2024
Recent price action suggests gold may be due a modest pullback

Big, ugly and unusual given the escalation in geopolitical tensions in the Middle East. You can see why traders are questioning whether the big reversal in gold last Friday may signal we’ve seen a near-term top after a rollicking start to 2024.

Gold showing signs of rally fatigue

While the price action does scream a little ‘blow-off top’, with the price surging to fresh record highs earlier in the session before unwinding spectacularly into the close, it’s probably a little too early to write-off the rally just yet.

As detailed in a note on gold and silver last week, there are numerous factors that explain the sizzling start to the year for precious metals, with geopolitical tensions being only one consideration. And even though the news flow over the weekend could have been much worse, it’s a big call to assume that’s the conclusion to hostilities in the region.

Gold bulls defend uptrend

As seen in the daily chart below, the uptrend gold has been sitting in since late March remains intact with the price continuing to attract bids on dips around these levels. Even though the uptrend in RSI has been broken, indicating waning upside momentum, until we see price break definitively through the uptrend, it’s difficult to get too bearish on bullion right now.

Should the price hold above the trendline, trader can use dips towards this level to enter long positions, allowing for a stop to be placed below for protection targeting a push back to the former record high of $2431.50.

But should that give way $2200 is possible

If the trendline were to give way – a clear and growing risk given the price action on Friday and waning bullish momentum – the trade above can be flipped around, allow for traders to sell the break with a stop above the former trendline for protection.

Minor resistance is found at $2305.75 and $2265.75, with a more pronounce support zone located just below $2200 given the proximity of horizontal support, uptrend support running from mid-February and the 50-day moving average.

Should a downside break occur, it should not be interpreted as anything more than a corrective move with the pullback likely to draw buyers from the sidelines in the absence of a big upward shift in the US interest rate outlook or an abrupt de-escalation in geopolitical tensions. Neither see likely near-term.

-- Written by David Scutt

Follow David on Twitter @scutty

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.