prices have reclaimed the $3300/oz handle but there are growing signs of exhaustion as the precious metal looks to consolidate gains.
The rally has been spurred on by weakness while haven demand returned overnight as Israel-Iran tensions escalated.
US Tax Bill Uncertainty
The Republicans negotiated through the night on Wednesday over a bill that’s expected to include compromises on the state and local tax deduction and spending cuts. House Speaker Johnson announced this morning that they came to a $40,000 SALT deduction cap agreement. This uncertainty did add to Gold’s appeal yesterday and aided haven demand.
Renewed Haven Demand Spurs on Rally
Israel is preparing a possible strike on Iranian nuclear facilities, multiple U.S. officials told CNN in a Tuesday report. Haven demand benefitted overnight as concerns rose over a potential wider conflict in the Middle East as a result.
Tensions appear to be on a knife edge following the report, as negotiations between the US and Israel rumble on. Officials told CNN that it’s not yet certain whether or not Israel will decide to ultimately act on its plans, adding that Israeli leaders are likely watching for how the U.S.-Iran deal evolves. The National Security Council, the Israeli Prime Minister’s office, and the Israeli Embassy in Washington did not confirm the reports when asked by CNN and Reuters.
If tension remains then Gold could continue to find support. Any indication that this may not come to fruition could have the opposite impact on Gold and see any safe haven buying temporarily come to a halt.
Gold prices continue to be the best gauge for market sentiment with the precious metal remaining extremely sensitive to any changes. This is likely to continue for now as a host of risks remain but they are slowly moving to the background.
Lack of US Data
The lack of US data is another area where the precious metal has benefited as it has resulted in a weaker US Dollar. The last few weeks have seen the US Dollar receive some support when data has been positive.
Last week’s US Data actually aided the precious metal as growth concerns returned to the fore. Thai sparked the rate conversation once more with Fed policymakers signaling caution as global growth appears to be coming under threat.
Technical Analysis – Gold (XAU/USD)
From a technical analysis standpoint, gold has printed two bearish four-hour candles in a row. There is also a potential evening star candlestick pattern which hints at further downside.
Looking at the candles though, the previous four-hour candle left a massive downside wick and failed to close below the 3300 handle. This is a sign of the buying pressure still evident in Gold markets.
If the 3300 handle holds firm, a move beyond the daily high at 3320 appears likely.
A four-hour candle close below the 3300 handle would be a sign of caution for market participants. It will not, however, invalidate the bullish structure with a four-hour candle close below the swing low at 3212 needed for such a development to take place.
In short, while bulls remain in control there is a possibility of a deeper retracement if the 3300 handle gives way.
Gold (XAU/USD) Daily Chart, May 21, 2025
Source: TradingView
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