Gold, Crude Oil Prices Soar on Rising Middle East Tensions, FOMC Next

• Gold and oil prices have surged due to rising tensions in the Middle East.
• Gold with a trendline break as bulls eye $2480/oz, FOMC meeting next.
• Brent crude oil found support around the 78.00 handle and is currently trading at 80.82 a barrel, with potential for further upside due to geopolitical risks.

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Gold and oil have both surged due to rising tensions in the Middle East, which began during the US session yesterday. An airstrike on Lebanon followed by an airstrike on Tehran targeting senior Hamas leader Ismail Haniyeh has significantly increased safe haven demand.

These events set the stage for an interesting few days from a geopolitical standpoint, with tensions expected to escalate as Iran’s incoming President, Masoud Pezeshkian, is anticipated to respond.

World leaders have already called for calm amid growing fears of regional spillover, which could have widespread consequences. Any hope for a ceasefire will likely be sidelined, leading to increased safe haven demand flows, with gold and potentially the US dollar benefitting.

As the US session approaches and with the FOMC meeting scheduled later in the day, markets may calm down. This could lead to some consolidation and potentially a pause in the recent rally in gold and oil prices.

Surprisingly, despite benefiting from safe haven demand on Monday, the US dollar has struggled this morning. This could be due to market participants’ apprehension ahead of the FOMC meeting.

Brent Crude Technical Outlook

Market participants may fear supply disruptions if a wider conflict breaks out in the Middle East. This has led to a rebound with Brent finding support around the 78.00 handle, up around 1.6% at the time of writing to trade at 80.82 a barrel.

From a technical standpoint, the daily candle close below the 80.00 mark yesterday hinted at the potential for further downside. The external threat posed by geopolitical risks have scuppered that move for now at least.

The concerns around Oil prices are mixed at the moment, with concerns around depleted stockpiles countered by the growth concerns out of China. 

Later in the North American session, the US Energy Information Administration (EIA) will release the Crude Oil Stocks Change report. The market expects a decline of 1.60 million barrels for the week ending July 26, following the previous week’s decrease of 3.741 million barrels.

Tomorrow’s OPEC+ meeting is not expected to result in significant changes to oil output levels. While further reductions are unlikely, there seems to be little chance of an increase in production.

Market participants hope that this meeting will provide clarity from OPEC, allowing attention to shift toward supply risks stemming from Middle East conflicts.

Brent Crude Oil Daily Chart, July 31, 2024

Source:TradingView.com

Support

• 80.00
• 79.00
• 77.50

Resistance

• 81.58
• 83.00
• 84.72

Gold (XAU/USD) Technical Analysis

From a technical standpoint, gold has surpassed the descending trendline that has been in place since the July 17 high around the 2481.00 level.

The breakout has gained momentum without any retest of the trendline, thus not offering a better risk-to-reward entry point. The 100-day moving average provides support around the 2405.00 level.

Immediate resistance is at 2432, followed by the 2450 mark.  Based on the rules of a trendline break, in theory the break should lead prices toward the previous highs at 2481.00.

With the FOMC meeting scheduled for later today, it will be interesting to see if bulls continue to drive gold prices higher.There is a strong possibility that markets might enter a period of consolidation ahead of the meeting later in the day.

GOLD (XAU/USD) Four-Hour Chart, July 31, 2024

Source: TradingView (click to enlarge)

Support

• 2405
• 2394
• 2378

Resistance

• 2432
• 2450
• 2467

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