Gold bulls have long been waiting for geopolitical troubles to justify the metal’s record prices.
However, markets often play rough games with high expectations, as we recently saw with Nvidia and Microsoft earnings. This aligns with the adage “Buy the rumor, sell the news.”
Similar profit-taking moves have previously occurred in silver, platinum, and palladium, so investors might have thought gold would be exempt, given its reputation as a true safe-haven.
However, the recent unexpected market behavior in relation to geopolitical conflict is surprising. Despite ongoing tensions and heavy military activity in the Middle East, stocks actually rallied after Trump assured the protection of the Strait of Hormuz.
Risk assets are decidedly rebounding, with cryptocurrencies surging to monthly highs as well as global Stock Markets; This proves how unusual these war flows have been.
So, why are safe havens selling off?
The US Department of Defense has certainly demonstrated its capabilities to rapidly damage key Iranian positions, alongside the Israeli Air Force.
Investors fear a prolonged conflict in the Middle East, so the idea of shorter operations is providing a sense of relief, as reflected in the market.
Investors also just received yet another report of US economic strength with another beat in Services PMI (56.1 vs 53.5 estimates), along with firming Private ADP Employment. Difficult to justify metal-boosting rate cuts with such solid data.
Friday will provide more clarity on that aspect with the monthly NFP data for February; Expect this one to rock Market expectations again!
Let’s conduct a multi-timeframe analysis of gold, as its recent price action has formed a double top. Will this signal the start of a real downtrend?
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