Where we are: Spot gold is currently trading around $4,559, recovering from last week’s losses. Bullion is pushing higher after a risk-on overnight session, spurred by increasing optimism over a potential US-Iran deal. This level places it above Friday’s New York close, and within striking distance of the $4,600 mark.
What’s driving it: Rising US real yields continue to act as a headwind for gold, with the 10-year TIPS yield at 2.18%, up 5bp from last week. However, the prospect of easing geopolitical tensions, particularly a potential US-Iran deal, is providing a countervailing force. A weaker dollar, spurred by hopes for a deal that could see Iranian oil returning to markets, adds to the upward pressure on gold.
- US 10Y real yields continue to climb, putting downward pressure on bullion.
- Goldman Sachs flagging that hedge fund tech positions are near record highs suggests risk appetite is high, and provides some support to gold.
- Net non-commercial gold positioning remains moderately long at +159,833 contracts, near the 6th percentile, suggesting there is room for longs to add to their positions.
NY session focus: The main focus for the New York session will be the market’s reaction to further news on the potential US-Iran deal. Traders will be watching for any clarifications from the White House after President Trump’s comments about the US blockade of the Strait of Hormuz. Key levels to watch are $4,600 as resistance and $4,500 as support. The trade that’s working is buying dips on dollar weakness, but the trade that’s at risk is shorting US yields. The pain trade for gold is a hawkish surprise out of the Fed or a breakdown in US-Iran negotiations. Expect quiet price action until the 08:30 ET data.