Geopolitical tensions between the U.S. and Iran sparked some significant volatility in gold this past week. However, when all was said and done, the yellow metal notched a fifth consecutive higher weekly close.

Gold set a near-7-year high on Wednesday at 1611.41, after Iran launched missile attacks on Iraqi airbases where U.S. troops are stationed in reaction to the U.S. drone attack that killed Iranian general Soleimani.

As a result of that upside extension, more than 61.8% of the entire 9-year corrective/consolidative phase since the all-time high was established at 1920.74 in 2011 has now been retraced. That bodes well for the long-term uptrend, despite the rather precipitous retreat from Wednesday's high when the U.S. decided not to respond militarily to the Iranian attack.

Spot Gold Monthly Chart

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While Wednesday's price action resulted in a technical reversal, I saw it more like a return to the general area where gold was trading after the drone strike on Soleimani. I was watching the 9-day SMA, which was tested both on Thursday and Friday but held on a close basis.

Spot Gold Daily Chart

Spot Gold Daily Chart

The fact that gold closed higher on Friday both for the day and week os encouraging, but I'd like to see the 50% retracement level of the sell-off at 1575.81 exceeded to return confidence to the previously established 1625.93 Fibonacci objective. The cycle high at 1611.41 now defines a good intervening barrier.

Friday's weaker than expected U.S. jobs report for December was mildly supportive of the precious metals complex. U.S. nonfarm payrolls rose 145k, below expectations of +178k, versus a negative revised +256k (was +266k) in November.

Disappointing yes, but the November print is still solid, even with the downside revision. The recent averages for NFP should continue to keep the Fed doves at bay.

All in all, I'm impressed with gold's resilience in the face of new record highs in the stock market this past week, as well as a firmer dollar. We'll look for further upside retracement in the week ahead as confirmation that the bull trend is alive and well.


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