Gold has suffered a 3.5% decline over the past four days following its impressive rally to a seven-year high last week.
It rallied on the back of a United States airstrike that killed Iranian military general Qasem Soleimani, which caused tensions to mount between the two nations.
However, since then, there has been a de-escalation in hostilities and the prospect of full-scale warfare has thankfully reduced, with Donald Trump leaning towards a diplomatic negotiation with Iran despite the Middle Eastern country’s promise of retaliation.
As a result, gold – which is a common hedge to the traditional financial system – has begun to stutter, with price falling back towards the $1,530 level of support.
From a technical perspective, it is still trading above the 50 EMA on the daily chart, which could become an immediate level of support until a long-term solution is found between the US and Iran.
Bitcoin is often touted as ‘digital gold’ as it is also a common hedge away from traditional currencies and capital markets. This has been reiterated by the correlation between both charts in light of last week’s events.
The world’s largest cryptocurrency also rallied significantly as the prospect of warfare became increasingly likely, with the digital asset suffering a 5% slump as tensions waned.
With Iran admitting responsibility for the Ukrainian commercial aircraft that was shot down last week, killing all 176 passengers, there remains a chance of potential escalation over the coming weeks, which in turn could spur the likes of Bitcoin and gold.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.