On Wednesday, gold futures surged after a report that Israel was planning to attack Iran’s nuclear sites, while weakness in the dollar added one more leg to this sudden, bumpy move.
I anticipate that growing concerns over US fiscal health due to surging uncertainty over tariff trade negotiations also kept gold prices on the higher side despite its decreasing potential as a safe haven due to its costlier valuation. Other safe havens like Japanese Yen and Bitcoins are available to replace gold, a non-yielding asset.
Undoubtedly, this rally in gold prices was the outcome of the CNN reports on this possible strike by Israel. At the same time, there was no confirmation of any such strike by the Israeli government seems to be a temporary panic, as any such strike is likely to create a severe degeneration in Middle Eastern geopolitics, which goes against Washington’s desire for diplomacy with Tehran.
I find that the current scenario is likely to calm down shortly with the US President Donald Trump’s intervention, who does not favor any such crises when he wants to expand his trade at the global level, as he has recently intervened to stop further escalation between India and Pakistan.
Secondly, any strike from Israel will also draw a bitter retaliation from Iran, with the two countries engaged in a series of strikes against each other last year that helped the yellow metal to turn bullish, but this time, the heightened gold prices weaken the safe haven potential of the gold.
Technical Levels to Watch
In the weekly chart, gold futures look evident enough to show the quantum of bearish pressure at the current levels, as the gold futures are holding at critical support at 9 DMA at $3230 in the weekly chart, but are just below a critical resistance at $3358.
I anticipate that any attempt by the gold futures to cross this significant resistance this week will attract big bears to load fresh shorts with a stop loss at $3457 for a target at the 20 DMA at $3037 for the next two weeks.
In the daily chart, gold futures are trading at $3222, just above the 20 DMA at $3290 indicating some more upside despite the formation of a bearish crossover with a downward move by the 9 DMA below the 20 DMA that could continue to extend bearish pressure till the gold futures do not move above the immediate resistance at $3337.
Undoubtedly, if the gold futures don’t sustain above this immediate resistance at $3337, a reversal likely to be steeper than may form an exhaustive hammer in today’s session, as the confirmation from the Israeli government is still pending.
Inversely, if the gold futures cross this immediate resistance to test the next resistance at $3358, big bears will take a short position in gold with a stop loss at $3510 for a target at $3040 for the second week of June 2025.
Disclaimer: Readers are advised to take any position in gold at their own risk, as this analysis is based only on observations.