Gold Hits A 6 Year High As Iran Remains In Focus

Okay, a very good morning to everyone. Monday, the 6th of January. Happy New Year! Hope you had a great break. Uh, if you are new to the channel, don't forget to like and subscribe for further updates. We're going to be doing it, myself and Sam predominantly, every weekday morning, our macro kind of market update. So so me from the fundamentals, Sam from the technicals. We'll also have lots of other interesting pieces, live events, so covering central bank decisions. I did a video about how to use Twitter effectively for trading over the Christmas break, so lots more of that sort of stuff to come. So do make sure you subscribe to the channel if you're not or haven't already done so. But otherwise, the big news, of course, over the last couple of days has been the market's response to the developments of the killing of one of Iran's top military commanders, Soleimani. And that continues to be the main narrative for this morning's open in UK and Europe. And as per the headlines this morning, as you can see to the side of me, some further developments, this time in regards to not only Iran and what they've been saying, but also Iraq. That was the actual geographic location of where this commander was killed at that Baghdad airport. Just a few days ago. So looking at the markets this morning, as you can see, just to recap, top right-hand corner is my gold futures chart, and we're up another $22 this morning. You'll remember I did a briefing on Friday just to update on the significant development that had occurred, and we were up at that time about $27. So continuation of the, the moves as tensions in Persian Gulf remain particularly tense at the moment about the fears of potential retaliation. I was looking at the markets yesterday on the Sunday, and of course the Middle Eastern markets open on a Sunday, and I saw the credit default swap of Saudi Arabia spiked or blew out even more than what it did in the September Iranian reported drone strike on the Aramco network. And all of those respected local regions and their stock indices got really hit quite aggressively yesterday. So continued kind of— that's the main headline kind of macro theme at the moment, a continuation of sorts. And as you can see here in the center left chart, the DAX future just breaking the range since the, uh, the opening trade electronic markets, at least from the overnight session. So equity index futures a little bit of further pressure. Nothing kind of spectacular in that respect, but obviously wait for the US to come in and see their real full return to markets from the new year, because things were otherwise, from a volume perspective at least, still relatively quiet last week. Elsewhere though, T-notes have already— having popped a little gap up at the reopening of trade— have reversed and closed the gap. However, equity markets still remain a little bit lower at the moment. Crude obviously still a bit of a standout. If I just make that crude chart a little bit bigger for a moment, that was the spike around the circle of price movement that we had, obviously much more aggressive when the event actually unfolded. That was in the overnight from last Thursday into Friday, and then you've had this gap up here. You can see at the reopening of a futures trade on Globex overnight, we've managed to put in a high of $64.72. So we were trading around $61 flat at the time before the news broke, and now we're trading up just shy of $65 at the high, to give you some kind of context to that move. So decent, but by no means, you know, a huge massive gap in prices. If we look at the daily continuation here, it helps to see where we were on that initial 15% move higher that we saw in the September 2019 attack on the Aramco network, which saw prices spike up to $63.50 in the futures. So we're now above that, uh, and on the upside, uh, probably looking to target next stop at around these highs that we were trading in April, uh, it's kind of beginning and the end of the month of April, which is, which is basically exactly to the tick of where it's tested this morning. It's a lot of people looking at these several multi-month high levels. Anything above there, the $66 handle, and then the prevailing April high of 2019 comes in at $66.60. Quite a few questions I've had over the weekend via Twitter. That is a way which you can reach me if you ever needed to. I am generally quite active on there, and I'll always try and respond to people's questions, as the same with these videos on YouTube. So do feel free feel free to ask me anything and I'll do my best to respond. But a lot of people asking me what's my kind of view in terms of a target for oil, questions like could oil go to $70 and things like that. What the answer to that is, yeah, absolutely it could go to $70, it'd go well north of $70. That's not necessarily my base case view, but could it? Absolutely. As we were discussing on Friday If you didn't catch it, you know, just go back on our, our channel and watch that, that video, because I go through specifically, uh, 3 geographically sensitive areas of the infrastructure for Saudi Arabia that, if targeted at any form of retaliation, could definitely see $70, uh, a distant rearview price point, uh, if it was to be taken out, much in a similar vein to what we had with the move in September. But why has the market continued some of this move on Friday, given the fact that you might have thought it's largely now priced in? Well, there's been two further developments that have occurred over the weekend. Uh, point one, sticking with Iran, is this one here, the, the second kind of bullet point on my screen. The Iranian government has said there's no more limits to uranium enrichment. Uh, remember, this is when Trump has come up against a lot of confrontation with other Western allies in regard to the breaking up of the Obama-brokered agreement of the 2015 move about uranium enrichment in Iran. And now what's happened is, given the developments, Iran has said that, look, there's no— no longer are we going to abide by any type of threshold. We're gonna, we're gonna really ramp this up now in response. In addition to that, the other thing is, if you remember, the commander who was killed didn't take place in Iran, it actually happened in Baghdad. Apparently a US drone striking, I believe it was near the airport, that actually killed him. Now what's happened here is in Iraq, their local parliament has voted to expel US troops from the country. And so this has created now new tensions outside of not just Iran, but now also in Iraq. And so, you know, this is kind of that contagion effect that can just add a little bit more spice to the mix, so to speak. So tensions still simmering. And what has that meant for Trump in response to these latest developments? He's kind of not backed down. In fact, he's done the kind of opposite. He's talked about a lot of these comments here about, you know, let this serve as a warning that if Iran strikes any Americans or American assets— we have targeted 52 Iranian sites— he goes obviously into capitals will be hit very fast and very hard. The USA wants no more threats. He then went on, I think that was another one he said as well that was similar vein, kind of really just suggesting that, you know, calling the bluff almost, I guess, of Iran. It's like, look, if you attack us, we're gonna, you know, we're gonna bring— what was the famous comment? It's 2018— fire and fury. Fire and fury will be coming the way of Iran. Well, yeah, Will's just reminding me, after he did say that, this was against North Korea at the time. Not Iran, but they became obviously best buddies. But perhaps again, this is the kind of strategy, you know, everyone knows that the US military is an almighty one, one that is way bigger than any other nation on the planet, and you would be very foolish to go against the US military. But, you know, we know that actual military engagement is probably something that Trump wouldn't want to embark on. Now if you think about it, for Donald Trump, he's got an election to manage. Now one of the things he's been trying to do is bring our boys home, you know, try and bring back troops out of the Middle East. In fact, he's now deployed an extra, I think it's nearly 3,000 troops into the region, I think in Iraq. Not only that, is that if you go to war, that costs money. And yes, there's one thing talking quite aggressive rhetoric in the Middle East which which might resonate with your electorate. However, that's different when then taxpayers' money is financing a war outside of your own area. And you know, what he wants to do is make America great again. He wants to invest money internally in order to increase fiscal spending within the economy. And so these types of things, these kind of veiled threats are exactly that, I think. I don't think this is something that would lead to that confrontation. Now let's not forget as well is that if there were any type of engagement, well then where's oil gonna go? It's only gonna go up, and that's not what Donald Trump wants either. So this is that kind of, you know, is it masterful or is it a little bit foolish? But it's an incredibly fine line of which Trump walks between trying to, I think, get his, you know, enhance his political kind of status by doing these types of methods. But obviously he's playing with a very dangerous game, which is the, you know, kind of political, global geopolitical friendships and alliances, as well as financial markets, of course. And for Iran, the other thing about Iran is, you remember on Friday they were saying you had the Supreme Leader, you had Rouhani the president, you had Zarif the foreign secretary, They all came out and obviously were talking very harsh about, you know, the response of which they would do in the retaliation. However, let's not forget Iran's economy is pretty much on its knees due to the sanctions that have been taking place. Their ability to sell oil has been depleted over recent months, and so the thought of then going into military confrontation with the US or its allies would be incredibly foolish, you would think. However, on the flip side, one thing was, is that because of the dire state of the Iranian economy, actually what that has happened through the death of such a political figure of relevance there domestically is that you've probably seen the scenes in Iran. I think it's the funerals happening today. It's quite incredible. And what a lot of strategists have been saying is that actually a lot of people had a lot of disdain for the government given the state of the economy and the impact on people's lives it was having on, on the ground in Iran. However, this has really brought and solidified the people together again against the US and the West. So yeah, net-net, I actually think that this will not blow up to a point of mass escalation where oil prices go 70, 80, 90. I do not think that's gonna happen, and I think at the very highest level, Donald Trump does not want that to happen, prices to be up at those types of levels. So yeah, my take for the moment is that yes, markets will remain quite, quite sensitive and fairly fragile to these developments. If there is any carry-through of these moves, I think you're likely to see that over the next coming days. But I reckon within a few weeks no one's going to mention this at all, and I think the world would have moved on by then. So that's my take at the moment. Um, having a look at gold prices, um, you'll remember we were talking about a very key test of a level of 2019 high that was occurring on, on Friday. Well, we're above there now, and we're looking to close in on the $1,600 level, which puts us back to levels not seen for, what, 6 years. So continuing to, to push higher in the yellow metal, much to the, uh, the pleasing of the likes of Will DeLucy, of course, who we know is a gold bug. So long may the gold move continue. In that respect. I'll let Sam talk over potential targets for that in both the intraday but also the medium and long-term perspective for the gold market. Elsewhere, other news stories data-wise, you have had overnight the Chinese service sector expanded at a slower pace in December following a strong rebound in the prior month, business confidence falling to the second lowest on record despite a pickup in new orders. Let's not forget that beyond this kind of little episode of Iran focus at the moment, I think the bigger, still more impactful, long-lasting story is the trade war. Where is that at the moment? Well, obviously everyone now is on tenterhooks waiting for, is this Phase 1 deal gonna get signed? Well, the dates now regarding that is the Chinese trade delegation plans to sign the first phase of its trade deal with the US in Washington on the 15th of January. So what, next Wednesday, according to people familiar with the matter. The plan is still to send its top negotiator, the vice premier, to ink the deal, so not actually Xi himself. So how I would interpret this is your date now, your expectation is the 15th, so that's your kind of marker for when we get the inevitable movement in these, these meetings, whether via rumors or delays and so on, because these will have an impact as to people's belief on whether or not indeed— forget Phase 2— can Phase 1 actually get wrapped up and, and signed and ratified. In that respect, having a look quickly at the calendar for today, what have we got coming out? Well, these are all final Service PMI data points points coming out of the eurozone. So not really too much of interest for the moment. In the US session as well, it's fairly quiet. You do have the Market Service PMI, but again, the final reading. Let me just quickly jump over to my own Twitter account because, as you have probably seen if you do follow me on Twitter, every Sunday I post a calendar of the week's main events. So this is it, and a quick overview of what the main events for this week are. I've bolded and underlined them. Today is relatively quiet, so today is very much a digestion of the Iranian story and these latest developments in Iraq as well. Tuesday starts to get a bit more interesting. You've got the flash eurozone CPI reading, US trade balance, factory orders, ISM non-manufacturing, PMI, kind of your headline readings. Wednesday, what's the latest status then going into the new year for the German economy? We've Germany, which obviously has come under immense pressure kind of building up throughout the period of 2019 over the risks of the protectionist policy in the US, the risk of Brexit, and so on and so forth. So factory orders in Germany Wednesday morning, ADP employment change, of course, on Wednesday. And that then leads us up for nonfarm payrolls, given the, the way the dates were for the beginning of the new year. Payrolls is going to be this Friday coming up. And then you've got a couple of Fed speakers. Fed's Clarida, Williams, Evans, and Bullard are all speaking on Thursday. It's a bit of a cluster there. Clarida and Williams, the vice chair and head of the Reserve Bank of New York, still remain voters. Evans and Bullard rotate off now with any voting membership in the FOMC. So do make sure as well into a new year you need to update your kind of crib sheet and your mindset as towards how to react now that those alternate members on the Fed have rotated. There'll be new voters in and some of the other voters out. Net-net, it's a fairly neutral change in terms of the composition of how hawkish and dovish the Fed is going forward. So it's not a great deal of change. All right, with that, let me hand you over to Sam. See what he's got to say from a technical perspective, and then I'll see you guys later on in the chat room. Thanks very much.

Yeah, hi guys, perfect timing really because the, uh, the S&P, uh, NASDAQ, and, and Dow all just coming to, uh, the break of these trend lines which had held things up this morning. You can see from, uh, the low that we had back on Friday initially reversed quite a lot. But you can see here, just these trend lines going now. So where we're coming to in the S&P anyway, look to, to test the lower part of the day, obviously quite key as well. But all of these markets, and the Dow perhaps more so than the others, just breaking those trend lines. And this could lead to another leg lower if they were all to break their lows today. Actually, you can see the NASDAQ not quite breaking through, but certainly one to keep an eye on there. The Euro Stoxx at the moment just on its low, but you can see the importance of that going back to the levels from the 30th as well, and just a bit below there. If that was to go, you're looking at the double bottom from the 19th and then the afternoon of the 13th. And the DAX here just breaking through, so you've got to imagine the Euro Stoxx will most likely follow through 13,000 on the futures, uh, just below here for the DAX as well. So stocks, uh, while we did gap lower, we retraced. You can see it's almost fill it. It's important right now if we can stay below these trend lines and test lows of the day, could see a further escalation of that. Oil, uh, understandably higher, not massively, but higher. Uh, the gap there from Well, here in the open of the futures, one to keep an eye on, and obviously the close as well should we see any retracement. It really hasn't done too much for the last hour and a bit, but of course keep an eye on that $64 just below, and then some very short-term resistance. But you see, 1, 2, 3 times before we finally broke through to $63.94. Again, would be a level to keep an eye on. If you're only really looking for that continuation, probably worth having on that trend line from the top, uh, of, of the day, uh, and a break of that, and then maybe this resistance point here at 6425, you could see a further push higher. So really, I think for these markets is a case of sort of let them tell you what's going on before really looking to, to get too involved. On the FX space, relatively quiet. You can see, uh, the euro here ranging Uh, sounds like 2018, uh, '19 all over again here. But, uh, in terms of levels to the upside, the, the high that we had, uh, from— what was it, the 31st? Obviously very important level. If you just go back here, uh, we'll put it on the daily chart. You can see some levels not traded before then since the 21st of October. So, uh, euro hit that quite nicely and has pushed lower since, uh, above where we're trading and Most notably on, on Friday's high is the R1, and also just a bit above there is, is some nice previous support which did break down, uh, 2 trading days ago on the 2nd. So keep a watch on that. And we're probably getting squeezed in as well, you'd, you would say, from the bottom as well, a couple of levels to— and trend lines to keep an eye on if we were to have a further push down. But for the moment, the range is small, uh, and I'll be more patient waiting for the euro and the pound as well, as focus is, of course, as elsewhere, uh, is on other markets elsewhere. And Eurostoxx is breaking following the DAX there. I can see out the corner of my eye the pound has obviously been coming down for a while. Uh, in terms of levels to be aware of today, uh, of course the, the low from Friday is, is one to, to have marked up. And if we were to push higher, the the low, the, the what was the second, we found support on the third before breaking through. 131.42 on the futures would be almost this mini range that I'd be keeping a watch on as well. You can see we had a bit of a false break of this trend which held from the 23rd. I think if we were to get an hourly close below there, then we could see a further run down as well. Quick look over at gold, which of course popped high higher today, up to almost getting to 1600 on the futures, which of course would be the first time in many a year. Having a look and just putting this onto a 15-minute chart in terms of how to, to play this, I think it's much like oil in the way— if you just have a look at maybe developing some of these trend lines, this one here from the Asian session, you can see you've got your free tests. So a break of that, you could see a further push higher, almost the opposite of what we've just seen with equities happen, uh, at the moment as well. Probably getting squeezed in from the low, wait for either a break either way, I think would be a safe— safer play to go with. And of course targeting some of these key resistance points, 1582 to the upside, uh, if that was to go. It's a quick look over at stocks just to see how they are behaving. You see the S&P now trying to take out its low of the day. The Dow was ahead of the game, so you've got to imagine that has broken it, which it has. And the NASDAQ now on the trend line. Let's have a quick look. It should be below. You can see that is as well. So the DAX, obviously volume-wise, is going to be pushing the most and has taken out almost— or briefly— 13,000. So stocks is on the back foot, below the trend lines. You've got to be a seller, uh, and then oil. Keep an eye on that trend line, as long with— along with gold, to see if we can get a push higher. Quite on the FX space as expected, other than really your safe haven pairs. But even the yen, that spiked higher, is, is kind of back to pretty much flat, uh, on the day. Hope you all have a good trading session. Uh, welcome back. Hope everyone's had a good break, and I look forward to catching up with you all at some point this week.