Gold, stocks surges and crude oil drops on Trump’s latest TACO

Markets have gone absolutely bonkers in the last couple of hours or so after Donald Trump once again surprised the markets by sending out a social media post suggesting that Iran and the US have had, in his words, “very good and productive conversations” regarding a complete and total resolution of hostilities in the Middle East. Based on these constructive discussions—which will continue throughout this week—Trump has instructed the Department of War to postpone all military strikes against Iran’s power plants and energy infrastructure for five days. This will, of course, be subject to ongoing negotiations, and a lot could still change. Indeed, shortly after Trump’s post, Iran's foreign ministry was quoted as saying there were no talks with Washington, accusing the US President of buying time. For now, however, stock markets and gold have stayed off their earlier lows, suggesting investors have welcomed the news. Brent crude oil was holding some $3 below the key $100 mark. Let’s see if this momentum holds and whether we can push on from here. But for now, things have flipped dramatically—and once again, it’s largely thanks to Donald Trump. His words are dictating market direction, and at the moment, very little else seems to matter. Volatility has gone through the roof. Let’s see what happens next.

 

Gold looks to end losing run

 

Before it managed bounce back today, gold had declined in eight of the past nine sessions, with the only exception being a flat performance last Tuesday when prices were still holding above the $5000 level. Let’s see if today marks the turning point now.

 

This steep sell-off has led to the breakdown of multiple support levels, intensifying technical selling pressure as each layer of support gave way. As a result, gold is now sharply lower on the month and has completely erased the gains made over the past three months. The advances from December, January, and February have all been wiped out, and earlier prices were beginning to chip away at the gains recorded in November. But following Trump’s latest TACO, there is now hope markets have bottomed out.  

 

Short-term momentum is clearly bullish on the intraday basis, while the higher time frame bias is bearish. For that reason, the preference is to take it from one level to the next, until the charts signal a decisive bullish reversal.

 

 

In terms of key levels, the first support to watch comes in around $4400. This marks the February low and it should have acted as initial resistance – but didn’t following today’s big V-shaped reversal. Looking higher, the next key resistance sits at $4477, which corresponds to Friday’s low. This level was broken overnight, triggering a sharp move lower. A sustained move back above $4477 would begin to improve the outlook and could pave the way for a short-term rebound.

 

On the downside, key support levels are less defined following the recent breakdown. The next major target is the $4000 level, which is a key psychological handle. Prices already came within $100 of this level earlier today before rebounding from the session lows, highlighting its near-term importance.

 

What now after the latest TACO?

 

From a macro perspective, the environment remains challenging for gold and other risk assets. The recent strength in US dollar, rising bond yields, and fragile risk sentiment means the environment is not very ideal for gold, especially if we now see renewed tensions in the Middle East. If that happens, investors often sell across the board—including gold and silver—which limits its safe-haven appeal in the short term.

 

For gold and equity market to stage a meaningful recovery, we would likely need to see some concrete de-escalation in geopolitical tensions. Today’s big recovery so far has been a good sign.  If the rhetoric improves over the coming days, then gold could rise even further. While that may seem counterintuitive, such a scenario would likely weaken the US dollar and ease bond yields—both of which would create a more supportive backdrop for gold and stocks to recover.

 

Keep an eye on crude oil prices. For as long as we don’t see a daily close back above the $100 level, risk appetite could well improve further.

 

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R