Gold Price Analysis and Talking Points
- Gold Prices Buoyed by Geopolitical Risk Premium
- Firm ISM Manufacturing PMI May Provide Stumbling Block
| Change in | Longs | Shorts | OI |
| Daily | 1% | -3% | -1% |
| Weekly | 2% | -8% | -2% |
Gold Prices Buoyed by Geopolitical Risk Premium
Gold prices have soared in response to an escalation in middle east tensions after US airstrikes had killed Iran’s Soleimani, who was the head of the elite Quds Force, alongside a top Iraqi militia commander. This attack has come after recent tensions in the region, in which a US contractor had been reportedly killed by Iraqi militia, while protestors had also stormed the US embassy in Baghdad. Consequently, Iran’s Supreme Leader has vowed a harsh retaliation and thus risk premium may keep gold prices tilted to the upside.
Firm ISM Manufacturing PMI May Provide Stumbling Block
As we have noted previously, seasonal factors are typically supportive for gold throughout January. In turn, with gold making a firm break above $1530, eyes now are for a test of the 2019 peak at $1557. However, one thing to keep in mind is the ISM Manufacturing PMI where market consensus is for a jump to 49 from 48.1. Therefore, a better than expected ISM Manufacturing PMI could take away some of the shine from gold, particularly with the precious metal in overbought territory. That said, we expect seasonal factors and renewed geopolitical tensions to keep gold prices underpinned.
GOLD PRICE CHART: Daily Time-Frame (Aug 2019 – Jan 2020)
Source: IG Charts
--- Written by Justin McQueen, Market Analyst
To contact Justin, email him at Justin.mcqueen@ig.com
Follow Justin on Twitter @JMcQueenFX
