Gold Tests Critical Thresholds as Oil Uncertainty and Rate Hike Risks Mount

As the US-Iran conflict entered its 199th day, Middle East diplomatic efforts appeared to stall with the postponement of a meeting between Iran and other Gulf states. Concurrently, attacks near the region’s two primary oil transit routes intensified concerns regarding global energy supply security.

The widening of the Middle East conflict into Yemen and drone strikes on a critical Saudi oil pipeline highlight an uncomfortable reality: the Iran war is no longer a short-lived energy supply shock, but a prolonged, unpredictable test of global economic endurance.

With crude oil back above $100 a barrel, markets are adjusting to a new and more volatile phase of the conflict, one in which many of the safeguards that cushioned the initial blow nearly seven months ago have disappeared.

U.S. President Donald Trump predicted last week that the conflict would end only after the U.S. midterm elections on November 3. This is a notable shift in tone from an administration that initially suggested the war would last weeks, not months.

Whether this new forecast proves correct is impossible to know, but recent developments at two of the world’s most important energy arteries suggest it may be very optimistic.

Yemen’s Iran-aligned Houthis have made rapid advances over the past week, tightening their grip on the Bab el-Mandeb Strait at the southern entrance to the Red Sea. The group announced a naval blockade of the shipping route in July and has reiterated that transit remains safe for all vessels except those belonging to Saudi Arabia.

Oil prices rose sharply early Monday after more Houthi attacks on Saudi Arabia and fresh strikes to the Strait of Hormuz ramped up concerns over supply disruptions in the region.

Undoubtedly, a delay in planned talks between Iran and other Persian Gulf powers over Hormuz also added to anxiety over supply disruptions, adding to oil’s premium and keeping crude close to annual peaks.

U.S. President Donald Trump on Sunday brushed aside a report that Iran acquired satellite images of a base in Jordan from Chinese ‌entities before an attack that killed three U.S. troops there in July.

A recent report in the Wall Street Journal cited unnamed U.S. officials about the attack in Jordan. Asked whether he would mention the issue at an upcoming meeting with Chinese President Xi Jinping, Trump did not directly answer, and instead equated the surveillance activities of China and the United States.

“They basically do what we do,” he told reporters aboard Air Force One. “When they say China spies on us, I say you’re right, and we spy on them too.”

The Chinese and U.S. presidents are expected to meet in the United States on September 24, although China has yet to officially confirm that the meeting will take place.

Trump on Sunday reiterated his view that he has a good relationship with Xi.

“I think he’s behaved reasonably well, and we behave reasonably well,” Trump said as ‌he flew back to the United States after a weekend trip to Ireland.

Meanwhile, to date, at least 18 U.S. service personnel have been killed since the U.S-Israeli war with Iran began at the end of February.

Undoubtedly, it is difficult to identify the Chinese entities that supplied the imagery to Iran, and did not allege direct involvement by Beijing.

On Monday, China said it has consistently and strictly fulfilled its international obligations, without elaborating further. “We firmly oppose unfounded suspicions and accusations made without evidence,” Chinese foreign ministry spokesperson Guo Jiakun said at a regular news briefing when asked for a response.

Trump’s comments appeared consistent with the administration’s recent efforts to play down wide-ranging tensions between Washington and Beijing, despite U.S. frustration over Beijing’s close ties to Tehran.

Technical Levels to Watch
On a weekly chart, after opening the week at $4,364.25, tested the week’s high at $4,396.70 and week’s low at $4,393.50, gold futures are trading at $4,314,65, after facing significant resistance at the 9 EMA ($4,387.57) just trying to hold the key support at the 50 EMA ($4,285), where a breakdown could push the futures to test the next key supports at $4,250.50 and $4,180.45.
On a daily chart, after opening the day at $4,73.35, tested the day’s high at $4,396.70, and day’s low at $4,293.50, gold futures are trading at $4,312.62, below the 100 EMA ($4,364.59), and trying to defend the key support at the 50 EMA ($4,312.98), where a breakdown is possible due to the formation of a “Bearish Crossover”, as all the Exponential Moving Averages (9, 20, 50, 100) have pierced the key support at the 200 EMA ($4,560.53).

Undoubtedly, a breakdown below the 50 EMA will accelerate a selling spree to push the futures to test the next key supports at $4,124.81 and $4,046.21 on the daily chart.