Gold prices fell 0.8% during Monday, trading below the key level of $4,400 per ounce, and are on track to decline for the second consecutive session.
The yellow metal is currently trading below the weekly pivot point of $4,408, as it looks to test the first weekly support level at $4,305. A break below this level is likely to lead to further losses, with the next support level at $4,180.
If gold manages to break above the weekly pivot point of $4,408, it will test resistance levels near $4,533 then $4,636.
In terms of geopolitical tension, the military standoff in the Middle East — and the effective closure of the Strait of Hormuz — have shown little sign of approaching a resolution.
The conflict itself, now six months old, has entered a tense stalemate. The U.S. appears to be either “incapable” or “unwilling” to conclude the fighting, while Tehran is “digging its heels”.
However, they flagged that Washington seems to be “winning the war of Hormuz.” According to Reuters, an American naval blockade of Iranian ports, along with tougher sanctions, are curbing Tehran’s oil exports and access to foreign currency.
The Iranian economy is showing signs of strain as a result of these measures, Reuters reported, citing Iranian insiders and regional sources.
Whether that forces Iranian leadership back to the negotiating table remains to be seen. As the Vital Knowledge analysts put it, the U.S. pressure may end up being a “Pyrrhic victory as Tehran’s economic desperation prompts it to escalate the conflict even further.”
On the economic data front, highlighting the economic calendar in the coming days will be the release of key U.S. inflation data for August, which could provide a glimpse into how the Federal Reserve will calibrate interest rates later this month.
Headline consumer prices are anticipated to have risen by 3.4% in the twelve months to August, equaling July’s pace. Month-on-month, the figure is seen accelerating to 0.4% from 0.1%.
The so-called “core” consumer price index, which strips out volatile items like food and fuel, is tipped to stand at 2.4% year-on-year and 0.2% month-on-month. Respectively, the two numbers came in at 2.5% and 0.2% in July.
Friday’s readings come hot on the heels of a blockbuster August jobs report that pointed to resilience in the labor market despite an early-summer swoon.
Finally, markets are awaiting U.S. jobless claims data, with forecasts indicating that 205,000 Americans filed for unemployment benefits, down from 206,000 in the previous reading.