Gold Slips as Oil Jumps on Iran-Israel Conflict

2024-10-08 | Commodities , Daily Analysis , Daily Insight , Gold , Oil , Precious Metals

Gold Slips as Oil Jumps on Iran-Israel Conflict

Gold

On Monday, gold prices experienced their fourth consecutive daily decline as the market adjusted its expectations for a November rate cut by the Federal Reserve. The strong dollar and rising US Treasury yields—surpassing 4% for the first time in two months—added pressure on gold prices.

At one point, gold briefly fell below $2,640 per ounce. By the close, gold had dropped 0.40%, settling at $2,642.46 per ounce.

Alberto Musalem, the newly appointed President of the St. Louis Federal Reserve, expressed support for a cautious approach to rate cuts. Meanwhile, Neel Kashkari, President of the Minneapolis Fed, noted that the US labor market remains strong, and the goal is to preserve this strength through measured rate reductions.

These developments supported the dollar, which hovered near a seven-week high. The yield on the 10-year US Treasury note also surged past 4%, increasing the opportunity cost of holding non-yielding gold, thus reducing its appeal for investors.

According to CME’s “FedWatch Tool,” the probability of a 25 basis point rate cut by the Federal Reserve in November stands at 87.3%, while the likelihood of maintaining current rates is 12.7%. The probability of a 50 basis point cut has now fallen to zero.

FXStreet analyst Eren Sengezer noted that developments surrounding the Middle East conflict and US inflation data could influence gold’s trajectory this week. Investors will continue to monitor Fed speeches and geopolitical events today.

Gold Technical Analysis:

Gold initially rose before retreating on Monday. The price rebounded from the $2,640 level during European trading hours, briefly surpassing $2,652 before pulling back.

During the US session, prices dropped sharply to $2,637 before stabilizing and entering a consolidation phase, eventually closing near $2,644. The market continues to experience broad price swings as both bullish and bearish forces compete.

Gold Slips as Oil Jumps on Iran-Israel Conflict
(Gold Futures, 1-day chart) 

Today’s Focus:

  • Strategy: Focus on selling into rallies, with opportunities to buy on dips.
  • Resistance Levels: $2,660 – $2,665
  • Support Levels: $2,630 – $2,625

Oil

Oil prices surged by more than 3% on Monday as escalating tensions between Israel and Iran, coupled with the impact of Hurricane Milton, fueled strong upward momentum.

Brent crude reclaimed the $80 per barrel mark. WTI crude gained $2.76, or 3.7%, to close at $77.14 per barrel, while Brent crude rose $2.88, or 3.7%, to settle at $80.93 per barrel.

Israeli media cited an unnamed US security official stating that Israel would soon respond to Iran’s October 1 missile strike. Speculation has arisen regarding a potential Israeli attack on Iranian oil fields. US President Joe Biden said last week that he was considering alternatives beyond attacking oil fields as part of Israel’s response.

Hurricane Milton, which rapidly strengthened to a Category 5 storm in the eastern Gulf of Mexico, also contributed to oil’s price rise. The hurricane is moving toward Florida and could disrupt oil supplies from the Gulf region.

On Tuesday, early reports suggested that Israel’s air force had struck Iran, although this was not confirmed by major news outlets at the time of writing. Investors should continue to monitor geopolitical developments closely.

Oil Technical Analysis:

Oil prices maintained strong momentum throughout Monday, rising steadily. In European trading, the price surged past $74 per barrel and continued to climb above $75.5, setting a new recent high.

During the US session, prices pulled back briefly to $75 before resuming an upward trajectory, ultimately closing near $78.4. The daily chart shows a strong bullish breakout with sustained upward momentum.

Gold Slips as Oil Jumps on Iran-Israel Conflict
(Light Crude Oil Futures, 1-day chart) 

Today’s Focus:

  • Strategy: Focus on buying into dips, with opportunities to sell on rallies.
  • Resistance Levels: $78.5 – $79.0
  • Support Levels: $76.5 – $76.0

Risk Disclosure
Securities, Futures, CFDs and other financial products involve high risks due to the fluctuation in the value and prices of the underlying financial instruments. Due to the adverse and unpredictable market movements, large losses exceeding your initial investment could incur within a short period of time.  
Please make sure you fully understand the risks of trading with the respective financial instrument before engaging in any transactions with us. You should seek independent professional advice if you do not understand the risks explained herein. 

Disclaimer
This information contained in this blog is for general reference only and is not intended as investment advice, a recommendation, an offer, or an invitation to buy or sell any financial instruments. It does not consider any specific recipient’s investment objectives or financial situation. Past performance references are not reliable indicators of future performance. Doo Prime and its affiliates make no representations or warranties about the accuracy or completeness of this information and accept no liability for any losses or damages resulting from its use or from any investments made based on it. 
The above strategies reflect only the analysts’ opinions and are for reference only. They should not be used or considered as the basis for any trading decisions or as an invitation to engage in any transaction. Doo Prime does not guarantee the accuracy or completeness of this report and assumes no responsibility for any losses resulting from the use of this report. Do not rely on this report to replace your independent judgment. The market is risky, and investments should be made with caution. 

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