Gold News: Gold Market Braces for Bullish Gap Opening as Safe-Haven Demand Surges

Gold Eyes Record High as U.S.-Iran War Triggers Safe-Haven Surge

Traders will be eyeing the spot gold opening on Sunday amid the U.S.-Iran war. Some speculators are anticipating a new all-time high, given the expected volatility. With strikes on Iran by the U.S. and Israel intensifying throughout the weekend, uncertainty across global equity markets is also expected to rise, with investors likely to turn to gold as the best safe-haven asset.

Expect a Sharp Opening but Watch for the Whipsaw

We’ve read the news and we’ve seen the videos so we expect to see gold open sharply higher, how far it extends after the initial surge will depend on how long the war could last and how long it will take for professional money managers around the world to hedge the new risks they are being exposed to. However, we can’t say the military action on Saturday was a complete surprise, I mean President Trump gave 10-to-15-day notice, there are three navy fleets sitting off your coast, and Iran didn’t agree to drop its nuclear program in a timely manner.

These are the types of scenarios that professionals create models for, and speculators live for. So these two players are likely to be the source of volatility in the trading market, with one trying to layoff risk wherever they can and the other betting on huge rallies.

With the attack on Iran and its subsequent retaliation stealing the headlines all weekend, we expect to see some extra safe-haven demand for gold, meaning traders who already have some, chasing it higher. New investors buying the headlines will be another player and professionals who need to offset stock market losses, for example. This all adds up to huge volume, wicked volatility and the chance of a whipsaw trade.

Breakout Over $5143.89 Puts Record High at $5602.23 in Play

Technically, after consolidating for weeks between the 50-day moving average at $4794.69 support and Fibonacci resistance at $5143.89, XAUUSD finally broke out of this range last week, signaling the return of strong buyers, or buyers who are willing to buy strength and take offers. During the consolidation phase, investors were more passive, choosing to bid and wait for the market to come to them.

With the close at the one-month high on Friday, gold was put in a position with no visible resistance until the record high at $5602.23, leaving us no choice but to target that price.

A Gap Higher Near the Record Could Be a Trap

I don’t believe I can be a good analyst without mentioning some of my concerns. The first being, the price action last week and the close on the weekly high meant that there were a lot of longs in the market before the war began. And this means a gap higher opening especially near the record high could be sold after the initial surge. This would trap anyone who chased on the opening and bought. Conditions could turn ugly and volatile if the market tries to shake out the weakest longs.

Other factors I see that can limit the upside are a stronger dollar, a rebound in stocks after an initial sell-off, the announcement of fresh negotiations between Iran and the U.S.

If Russia and China Back Iran, We Could Be Looking at $6000 to $7000 Gold

The biggest worry for me and other traders is how long is this war going to last, and will it spread to other Arab nations if Iran continues to bomb their neighbors. But the big question remains, will Russia and China back their ally Iran. If they do in ways other than words then we could be looking at $6000 to $7000 gold rather quickly.

More Information in our Economic Calendar.