DAX, Gold Forecast: Two trades to watch

DAX opens lower amid tech weakness & renewed US-Iran tensions

The DAX, along with its European peers, is opening lower as investors weigh a tech sell-off alongside a fresh escalation in tensions between the U.S. and Iran, which has pushed oil prices higher and revived concerns over inflation and the outlook for interest rates.

Technology stocks are under pressure following weakness across Asian chipmakers, with SK Hynix leading losses despite another strong set of sales figures from TSMC.

SK Hynix slumped 14% in Seoul trading after a strong Nasdaq debut on Friday, when its ADRs rose almost 13%. The reversal appears to reflect profit-taking after the recent rally and renewed concerns that AI-related valuations have become stretched.

Taiwan Semiconductor Manufacturing Co. (TSMC) fell despite reporting another impressive quarter, with second-quarter revenue rising 36% year-on-year. June revenue alone jumped almost 68%, reinforcing the view that demand for AI chips remains exceptionally strong ahead of the company's earnings release.

The selloff in chip stocks highlights growing nerves surrounding the AI trade. Investors are no longer questioning AI demand but are becoming increasingly worried over the huge capex spending by major tech firms and that cloud companies could be over-investing in AI infrastructure before consumer or enterprise usage catches up. This could lead to a sudden reduction in future orders for chipmakers. The entire chip sector has been on a rollercoaster in recent weeks.

The Eurozone and German economic calendars are quiet today. Attention will turn to Germany's wholesale price index tomorrow, alongside the start of the U.S. earnings season and U.S. inflation data, both of which could drive market sentiment.

DAX forecast – technical analysis

The DAX has extended its recovery from the 21,860 low to a record high of 25,920 before easing back. The index continues to trade above its rising trendline, the 50 SMA and the 200 SMA, keeping the broader trend firmly bullish.

Should the rising trendline and the 25,000 psychological level continue to hold, buyers will look for a move towards 25,500 before targeting the record high at 25,920 and fresh highs beyond.

On the downside, a break below the 24,800 support zone, where the 50 SMA coincides with the 76.4% Fibonacci retracement of the 21,860–25,920 rally, could open the door towards the 200 SMA at 24,340. Below there, attention turns to the 24,000 support zone, which also aligns with the 61.8% Fibonacci retracement.

Gold falls amid hawkish Fed concerns & a stronger USD

Gold is extending losses on Monday after posting a second consecutive weekly decline, as renewed U.S.-Iran strikes over the weekend lifted oil prices and revived concerns over inflation, reinforcing expectations that the Federal Reserve could keep interest rates higher for longer.

The U.S. and Iran exchanged strikes over the weekend, with tensions in the Middle East escalating further. Tehran said the Strait of Hormuz would remain closed until further notice, sending oil prices around 4% higher on renewed supply concerns.

The prospect of higher energy prices has raised fears of another inflation shock, strengthening the case for a more hawkish Federal Reserve.

Higher Treasury yields and a firmer U.S. dollar continue to reduce the appeal of non-yielding, U.S. dollar-denominated assets such as gold.

Attention now turns to tomorrow's U.S. CPI report and Federal Reserve Chair Kevin Warsh's first congressional testimony, both of which could provide further clues on the outlook for interest rates and, in turn, gold. Hot inflation and hawkish commentary could pull Gold lower, espcially if oil continues to rise.

Gold forecast – technical analysis

Gold broke down from its symmetrical triangle pattern and fell below the 200 SMA before finding support around 3,940.

The price continues to trade below the 200 SMA and the falling trendline resistance, while the RSI remains below 50, keeping the technical outlook tilted to the downside.

Sellers will look for a break below 3,940 to expose 3,800, followed by the psychological 3,500 level.

Any recovery would first need to reclaim 4,200, where the July high meets the falling trendline resistance. A move above this level would bring 4,300, where the 50 SMA and horizontal resistance converge, into focus before attention turns to the 4,500 level and the 200 SMA.