Gold bounces back on US-Iran deal hopes as FOMC comes into view

Gold recovered yesterday as expectations of a US-Iran agreement were revived. The market began shifting after Iranian state media said the country's security chief had met Supreme Leader Khamenei. Sources indicated that Khamenei used the meeting to emphasise the need to safeguard Iranian interests and carry out Tehran's conditions in an effort to bring the war and the impasse to an end.

The report was only a brief headline with little detail, but the market seized on it because participants are eager for encouraging news. The accepted narrative was that Iran's security chief had gone to the leader with some kind of framework for an agreement. Markets may also be especially alert to deal headlines so close to the US midterm elections.

Earlier today, Reuters reported that Qatari mediators gave Iran a new draft agreement in Tehran on Sunday, and that Tehran is considering it, with an answer expected by the end of the week. The report said the draft sets out a seven-day timetable designed to address the concerns of both sides, with each side required to take confidence-building measures every day. That timeline could begin early next week, depending on Iran's response.

The FOMC decision also lands today, and the Federal Reserve is widely expected to leave interest rates unchanged at 3.75%–4.00%. Since no new projections or dot plot are expected this time, the market's attention will be on any change in Chair Warsh's wording or in the statement's language.

A surprise rate increase would cause a hawkish repricing and hurt gold in the near term. A broadly neutral decision that does not point to an imminent hike could be read as dovish and spark a relief rally in precious metals. If the Fed simply follows through on the anticipated hawkish hold and avoids any big surprises, I would expect the same move on a smaller scale.

DAILY TIMEFRAME: GOLD TECHNICAL ANALYSIS

The daily chart shows the gold CFD pulling back somewhat and moving toward the descending trendline. If price reaches it, sellers may use the line with a clearly defined risk above it and continue aiming for support at 3,885. Buyers, on the other hand, will want to see a break to the upside before entering for a push toward the 4,700 area.

FOUR-HOUR TIMEFRAME: GOLD TECHNICAL ANALYSIS

On the four-hour chart, the price was rejected from the resistance zone around 4,070 as sellers moved in to target a decline to 3,885. A breakout would probably see buyers step in for fresh highs, with the downward trendline as the first target. Sellers, meanwhile, are expected to keep defending the resistance and the trendline in an effort to extend the move to new lows.

ONE-HOUR TIMEFRAME: GOLD TECHNICAL ANALYSIS

On the one-hour chart, there is little more to say: sellers have a better risk-to-reward setup at the resistance and the trendline, while buyers need a move above those levels to open the path to new highs.

UPCOMING CATALYSTS

Today brings the FOMC rate decision. Tomorrow, the calendar features the US GDP report, the US PCE and the latest US Jobless Claims numbers. Friday wraps up the week with the US Employment Cost Index.