Gold weekly outlook: Central banks and US-Iran deal eyed

Gold closed lower for the second consecutive week on Friday, although it finished the week well off its lows after rebounding on Thursday and holding on to some of those gains during Friday’s consolidation. The precious metal traded cautiously as markets awaited further developments regarding the US-Iran situation, and ahead of a busy week for central banks.

 

Gold outlook: Potential US-Iran deal could be mildly positive for gold

 

The US dollar remained largely supported last week, driven by elevated oil prices, inflation concerns, and strong investor demand ahead of the highly anticipated SpaceX IPO on Friday. Markets were focused on developments surrounding a potential US-Iran memorandum of understanding, with conflicting messages from US President Donald Trump and Iranian officials creating uncertainty for much of the week. On Friday, though, Iran’s Foreign Minister suggested an agreement was close.

 

A successful agreement in the week ahead could lower oil prices by easing concerns over energy supply disruptions and allowing Iranian crude exports to return to global markets. Such an outcome would likely improve risk sentiment and reduce some pressure on gold.

 

However, resilient US economic data, including stronger-than-expected consumer sentiment and a robust labour market, continue to support expectations that the Federal Reserve may maintain a hawkish stance even if oil goes down. That could keep the dollar’s potential downside limited, and keep gold inside a long term consolidation phase.

  

Big week for central banks

 

Attention now shifts to a busy week of central bank meetings. The Bank of Japan announces its policy decision on June 16, with a 25-basis-point rate hike largely expected. The Federal Reserve meets on June 17, where investors will look for signals regarding potential policy tightening later this year. Finally, the Bank of England meets on June 18, with markets expecting policymakers to remain cautious, though any hawkish surprise could provide support for sterling.

 

Technical gold outlook: Sideways consolidation

 

From a technical perspective, gold has now reached the main downside objective that we had been targeting below the March low at $4,098.

 

 

The metal broke beneath that level and nearly reached the $4,000 mark before bouncing sharply on Thursday alongside other risk assets.

 

Heading into the new week, traders will be watching a busy calendar of central bank rate decisions, while also keeping a close eye on any developments between the US and Iran, which could help set the tone for broader financial markets.

 

Anything viewed as negative for the US dollar would likely be supportive for gold, and vice versa.

 

That said, the precious metal still needs to reclaim several previously broken support levels before the broader directional bias can be considered bullish again.

 

Among the key resistance levels to watch, the first comes in at $4,235.

 

That level was tested on Friday, with gold failing to break above it.

 

Beyond that, the next major resistance zone lies between $4,366 and $4,400.

 

Should gold break through this area, the 200-day moving average at $4,446 would come into focus. The descending resistance trend line also intersects around this region, adding to its importance.

 

A move above the 200-day moving average would be considered a bullish development, especially if last Friday’s high at $4,481 is also breached.

 

At that point, any bearish bias on the precious metal would need to be abandoned.

 

Meanwhile, on the downside, the first level of support remains the March low at $4,098.

 

Below that, $4,000 is the next key downside target.

 

The outlook would become increasingly bearish if gold were to break below the $4,000 level once again.

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R