Gold Rally Capped for Now

Gold prices are caught between two opposing drivers currently. On the one hand, news of the US/Iran peace deal is feeding into bullish gold sentiment via lower oil prices. However, the initial downside impact on USD from news of the deal (which was helping support gold also) has faded on the back of the hawkish FOMC meeting yesterday. DXY was seen jumping above the $100 level as Fed policymakers turned more firmly hawkish. Nine of the eighteen members now forecast at least one hike this year, up from zero in March, with five members projecting two hikes. Market pricing for a Fed hike by year end has now jumped accordingly, sitting above 80% from below 60% prior to the meeting.

US/Iran Deal Signing

With USD spiking higher, the peace-deal rally in gold has stalled for now and consolidation looks likely while traders await further news. Tomorrow, the US and Iran are set to sign off on the initial deal in Switzerland, ushering in a 60-day negotiations window for the fuller deal terms. It could be that we see a fresh rally in risk assets on the back of the deal being signed, which could see some fresh upside in gold. However, if the focus stays with the hawkish Fed shift, this could complicate things near-term.

Technical Views

Gold

The rally in gold off the 4,092.60 level has stalled for now into the retest of the broken bull trend line and the 4,389.24 level. There is potentially a head and shoulders patten at play here if we break back below 4,092.60. In that scenario, 3,898.03 will be the next bear target to note. If we break higher, 4,558.62 is the next resistance to watch.