Precious metals remain on the back foot as US-Iran tensions raise inflation risk. Both metals dropped 1-2% yesterday. In today’s session, gold broke below $4,000 briefly before recovering, while silver trades around $59.
US and Iran sent conflicting signals ahead of fresh talks to restore peace. Washington said negotiations with Tehran are due to begin Tuesday in Doha, while Iran’s foreign ministry said that it would send a delegation of experts but ruled out direct talks. A stronger dollar backed by a hawkish Fed is creating headwinds for precious metals. Fed policymakers have already signalled their openness to tightening given the persistent overshoot in inflation. Should this week’s NFP (release on Thursday) come in with a solid reading, that’ll further solidify the cautious policy stance and pressure precious metals lower. Holdings in bullion-backed ETFs have contracted to their lowest level since September, and in this environment, further drawdowns appear likely. The previous week recorded gold ETF outflows of $4.39 billion, or 36 tonnes.
From a technical standpoint, gold broke below its descending channel yesterday and faces resistance between $4,070 and $4,100 (which contains the 200-period EMA on the 4-hr chart). A failed retest of the upper end of the range could be an opportunity to short, targeting profit at the $4,000 level. A break above the $4,100 range would bring the $4,200-$4,250 into play. This level also sees the 20-day EMA offering resistance and a possible level to short at. On the flip side, support is likely at $3,930, followed by $3,880.
Looking at silver on the daily chart, resistance is likely around the $61-$62 zone. This zone also sees the 50-period EMA on the 4-hr chart solidifying the resistance. A retest of the zone could be an opportunity to short silver with a take-profit at $56. On the flip side, support could be around $55-$56 (last week’s low).
US equity markets printed a sharp rebound on Monday, with the SPX index rising 1.29% and the NDX index rising 2.49% by close. Both indices continued the momentum in Tuesday’s Asian session with the SPX trading 0.16% higher and the NDX trading 0.53% higher.
The market rebound was driven sharply by a surge in technology-driven stocks, as investors returned to stocks seen as beneficiaries of the AI buildout. This led to a rise in global benchmark indices along with the US markets, lifting up tech and semiconductor-heavy indices like the Kospi and Nikkei, showing record levels of quarterly performance. This has been in stark contrast to a few months ago, when geopolitical tensions pushed markets down along with a significant global oil supply shock. Since its recent drawdown, the S&P 500 Index has given one of its quickest rebounds in history, gaining 20% from its March 30 low to its June 2 peak, a feat achieved just three other times since 2000. In terms of sectors, the S&P 500 was lifted up by the communication services sector rising 3.11%, consumer discretionary sector rising 2.68%, while information technology rose 1.69% on Monday, reinforcing the risk-on market sentiment. Focus for today may shift to Nike’s earnings after the market close, which might provide insights into overall US consumer demand.
From a technical standpoint, the SPX index has clearly bounced up after respecting an upward-sloping trendline support connecting the lows of 17th April, 11th June, and 26th June. The 50-day EMA around the $7344 level provided another layer of support on Friday, while prices have now crossed above the 9- and 21-day EMAs on the daily chart, supporting a bullish market structure. Reinforcing this stance is an RSI that has crossed above the 50 mark and is upward sloping, suggesting increasing momentum. The NDX index printed a similar price action, rising above its short-term moving averages and supporting a bullish market structure. A retest of the 21-day EMA around the $29655 level could provide an entry opportunity to go long the index.
US Dollar IndexÂ
The dollar fell by almost 0.25% in yesterday’s session as Trump announced US-Iran talks to take place in Doha. The underlying trend still remains bullish, driven by factors such as a hawkish Fed, artificial intelligence and a strong US economy. The dollar has edged higher in today’s session, fueled by investors’ anticipation of an 80% likelihood of a rate hike this year. Moreover, according to recent CFTC data, smart money and hedge funds have accumulated $34.3 billion in bullish bets on the dollar, the highest level in 16 months. The strength of the rally is also evident in the one-year risk reversal of the Bloomberg Dollar Index approaching its five-year average, though it’s still below levels seen when US exceptionalism last dominated the market narrative. Market participants will also be closely watching the 2-year yields, which are highly correlated with the dollar. Currently, 2-year yields have taken support at 4.08%, and a breakout above the immediate resistance at 4.23% will be closely watched for further bullishness in the index. Investors will also pay close attention to the US NFP data, which will be released this Thursday, for fresh cues on the monetary policy outlook.
Moreover, AI is also supporting the dollar through both economic fundamentals and capital flows. From an inflation perspective, that buildout is putting upward pressure on the prices of associated goods. At the same time, strong demand for inputs such as semiconductors, combined with constrained supply, is pushing prices higher. Together, these forces provide a positive impulse to both growth and inflation, supporting higher relative US yields.
Technically, the dollar index is trading at 101.23 and is marginally up in today’s session. It is forming a bull flag and showing price acceptance on the daily charts. It can be observed by connecting the descending trendline from the levels of 101.8, 101.75 and 101.43, respectively. A break and close above 101.43, followed by 101.81, will indicate further bullishness for the index. It is also hovering near its 9-day SMA at 101.24. On the contrary, a break below the immediate support at 100.68 will be bearish for the index.
Crude Oil
WTI is trading around $70.9 (-0.9%) in early Asian hours, while Brent is hovering near $73.9 (-0.5%), as improving shipping activity through the Strait of Hormuz and expectations of further diplomatic progress between the U.S. and Iran continue to weigh on crude prices.
Markets are becoming less sensitive to geopolitical headlines as the immediate risk of a major supply disruption has eased. Traffic through the Strait of Hormuz has picked up, with more tankers returning to the route and vessel movements gradually approaching pre-conflict levels. Morgan Stanley estimates that if flows recover to around 65% of pre-war levels, the global oil market could move back into surplus, adding downside pressure on prices.
However, uncertainty remains. Conflicting statements from the U.S. and Iran over the timing and scope of peace talks, along with disagreements over Iran’s role in overseeing the Strait of Hormuz, continue to cloud the outlook. While tanker traffic has improved, a full normalisation of supply has yet to be achieved.
From a technical perspective, WTI retains a bearish bias while trading below key daily short-term moving averages. However, if WTI holds above the 20 SMA at $71.40 on the 4-hour chart, the instrument could see upside within the intraday timeframe. Overall, WTI will likely trade in a tight range, with immediate support near $69.70 and resistance around $73.85. Brent may find support near $72.8, with resistance around $76.9.
