Geopolitical tensions are very much on the minds of every trader, and the sentiment among traders and investors continues to remain cautious. Israil has vowed to retaliate, but the exact timing of that and the extent of retaliation are very much known. Some investors and traders do believe that the fact that the Israeli government hasn’t responded since the Saturday attack may no longer be on the cards. And the worst-case scenario, which many anticipated on the back of Iran’s retaliation attack on Saturday, was an all-out war between Israel and Iran. So far, allies on both sides have called for cool heads, as a much bigger and wider war could easily trigger given the tensions that we have seen between the US and Russia and also between the US and China.
Economic Data
When it comes to US economic data, most of the important readings that traders pay close attention to are already here. For instance, in the last few weeks, we have already seen the US CPI inflation data and the labour market number. Today, we will have the US industrial production m/m number coming to the spotlight, and the forecast for that reading is 0.4% and 0.1%. The Fed chairman, Jerome Powell, will also be speaking later today, and his comments will be important from two points of view. Firstly, there is the traditional aspect, and that is what the Fed’s stance is towards its monetary policy in light of the recent inflation and job data. Secondly, does the Fed have any plans to support the market if the geopolitical tensions escalate in the Middle East and we see a much wider war?
Gold Prices
The precious metal is the one that needs very close attention. Now, big numbers have started to flow in the market, and this time these numbers have started to come from Wall Street giants. For instance, Citibank now believes that the gold price, under its current momentum, can actually touch $3,000. Gold prices have been very much anchored in place for the past two months due to two reasons. Firstly, inflation expectations, and secondly, the ongoing geopolitical tensions. The fact that the unknown is still unknown when it comes to Israil’s response to Iran’s attack has made traders more nervous. No one really knows how strong or light the response would be from Israil, and this means that the odds of much wider events taking place in the Middle East are still on the table. This particular aspect is keeping traders on the edge, and it is more than likely that the prices will continue to move higher.
Moving away from geopolitical tensions and factors relating to that, traders also like the fact that the Chinese GDP has now finally shown that the country’s economic growth is back on track. China is a serious player when it comes to buying gold, and an improvement in Chinese growth means that we could see strong demand for gold.
In terms of economic events, traders will be watching Jerome Powell’s speech, who is expected to deliver his remarks around 06:15 PM GMT time. The Fed already has a clear picture of two things: the US inflation reading and the US labour market. The question for traders and investors is: what will they do with their monetary policy? The fact that oil prices have serious potential to move higher and Brent oil prices can actually move above the $100 price mark would only provide more tailwind for inflation, an important economic reading that the Fed is trying its best to bring under control.
In terms of the price for the precious metal, the price is back in the positive territory for this week after a brief period in the negative territory yesterday. If you look at the weekly chart, the price has already closed in positive territory for the past 4 consecutive weeks, and it seems likely that the price may touch the level of 2,500 this week, especially if we get more clarity from Israil in terms of their retaliation attack towards Iran. The current support and resistance zones are shown on the chart below.
