Gold Continues to Shine
- Middle East tensions flare
- Economic uncertainty
- US dollar takes a hit
- Gold markets likely to go higher
To kick off the week, we have seen gold shoot straight up in the air. This is not much of a surprise considering that on Friday, the United States killed a top-level Iranian general in retaliation for several other minor attacks in Iraq.
Since then, a lot of chaotic action was witnessed around the world. When traders see this many things potentially going wrong at the same time, it’s very common for them to buy gold, as it can offer some safety.
Resulting uncertainty all around
The attack on a US base in Kenya over the weekend shows just how widespread the chaos could end up being, as retaliatory strikes against the United States are almost certain to begin. President Donald Trump has warned that any aggressive action by the Iranians would warrant an “excessive retaliation.” With that, while the Iranians are grieving the loss of General Suleimani, various extremist groups around the Middle East will be targeting US interests.
In other words, the situation will go far beyond just the United States and Iran. The attack in Kenya was carried out by terrorist group Al-Shabab, which has its roots in Somalia.
Now, the Iranians will have to save face by retaliating, while being careful not to do too much to provoke a full-blown war with the United States – something it cannot win.
It should also be noted that there is some economic uncertainty out there. The United States dollar has taken a hit over the last couple of days against several of the other major currencies, such as the euro, the pound, and the Australian dollar. This in itself can provide a measure of upward pressure in the gold markets.
Technical analysis for gold
Gold futures gapped higher to kick off the week, reaching as high as $1590 before pulling back a little. The market has been finding some trading volume near the $1580 level, but the gap has yet to be filled. More than likely, the market will pull back to fill that gap, which is closer to the $1555 level, where the “point of control” from volume profile trading on Friday will offer support.
Gold markets have taken off to the upside and look very likely to continue going higher. $1600 is most certainly within the realm of possibility in the short term, with a longer-term target closer to the $1800 level based on longer-term charts. A pullback should continue to offer plenty of value, and it will probably be some type of Iranian retaliation that drives gold higher.
In the meantime, the market simply waits to see how the Iranians will react.