Gold stops further declines amid lack of fresh drivers, ongoing geopolitical tensions

• UK-Iran tussle triggers the yellow metal’s pullback, greenback strength limits the recovery.
• Technical indicators favor the upside amid U-turn from oversold conditions, short-term support-zone.

Gold’s pullback from $1,453 fails to derail the underlying strength as lack of fresh clues, geopolitical tensions surrounding Iran triggers the bullion’s another U-turn to $1,418.25 early on Wednesday.

The US lawmakers’ ability to agree on a 2-year extension of the debt ceiling, coupled with positive developments surrounding the US-China trade balance, managed to extend the US Dollar’s (USD) previous rally backed by falling chances of the Fed’s extreme rate cut in July. It’s worth noting that the greenback buyers were strong enough to ignore sluggish data at home.

Given the negative correlation between the USD and Gold, the yellow metal was on the back foot since late Friday. However, a recent geopolitical drama concerning Iran triggered fresh safe-haven demand amid no major updates from the US.

Tehran derailed the UK’s effort to gather EU support for safe shipping through the Strait of Hormuz. In his speech at Paris, Iranian Deputy Foreign Minister Abbas Araqchi said that Iran will secure the Strait of Hormuz and not allow any disturbance in shipping in the key oil transport waterway, as per Reuters.

The Middle East nation’s representative also met French leader who back stepped from the British proposal of an exclusive European Union-led naval mission to ensure safe shipping through the Strait of Hormuz.

While tension surrounding Iran can keep pleasing the precious metal buyers, optimism surrounding the greenback weighs on the upside momentum. Also in support of the upside can be bearish bias by the major central banks.

Technical Analysis

FXStreet Analyst Haresh Menghani spots the metals’ recent recovery from last Thursday's swing low, backed by U-turn of technical indicators, as price positive catalysts:

Immediate resistance is pegged near the $1428-29 region, above which the precious metal is likely to accelerate the up-move towards $1434-35 intermediate resistance en-route the next hurdle near the $1440 supply zone. On the flip side, the $1422-20 region now seems to protect the immediate downside and is followed by the $1414 horizontal support, which if broken will set the stage for a move towards challenging the key $1400 psychological mark.