Gold slid as Iran set to launch a calibrated Israel attack

On early Friday, Wall Street Futures slid, while Gold jumped after a report that Iran is ready to launch an attack on north/south Israel directly within the next 24-48 hours with a barrage of lethal missiles and drones, while IDF, Mossad approved Iran to strike back plans; Israel’s Defense Minister Gallant told U.S. counterpart that if Israel comes under attack it would respond by striking Iranian territory. The IDF and Mossad approved plans for a counterattack on Iran if Israel would come under attack from Iranian territory.

Additionally, the coordination between the U.S. and Israeli militaries has increased. Iranian officials said the supreme leader Khamenei has discussed an attack plan but had not made a final decision to launch it. Iranians would likely strike Israeli territory and not an asset abroad. As per WSJ reports, IRGC (Iran) may first strike on the Dimona nuclear reactor in the Negev, and on the Haifa airport in Israel, while there could be a further strike on water desalinization plants and power stations, should Israel retaliate.

But Iran’s Khamenei is reportedly also concerned that a direct strike on Israel would result in an all-out war involving even the US, which Iran is willing to avoid. Thus Iran may use its proxies in Iraq and Syria (Hezbollah, Houthi) to launch such missile/drone attacks on Israel rather than directly from Iranian territory. Iran and its proxies may also strike the IDF infra in Golan Heights or even Gaza, to avoid hitting Israel directly. Another plan under consideration was an attack on an Israeli embassy, with an emphasis on a mission in one of the Arab countries, to indicate that diplomatic ties with Israel, come at a cost. In 2022, Israel launched several drone attacks on vital Iranian nuclear installations, killing even scientists of the project along with suspected cooperation by the US CIA. Thus Iran is taking some precautions this time in launching a direct attack on Israel originating from its territory.

On any way, on early Friday, Gold spiked to a fresh life time high of almost 2431 from 2395 in a matter of 90-120 mins after Israel reported several missile attacks (by Hezbollah, which were successfully intercepted). There was also hostile aircraft infiltration in northern Israel near the Lebanese border with Israel and Reports of 30-50 missiles launched from Lebanon at Israel.

At the same time, several countries (India, the US, the UK, France, Russia, Germany, and various European countries) issued an immediate travel advisory against Iran, Israel, and the Middle East (ME). But soon Gold stumbled from 2431 to 2332 after a report that Iran blinked in the last minute to launch the much-awaited missile/drone attack on Israel directly from its soil. Iran also signaled 'calibrated' retaliation against Israel. As per the report, Iran has signaled to allies and Western nations that it will retaliate in a calibrated manner to avoid an all-out war with Israel.

As per the report, Iran was planning to conduct a strike against Israel but postponed such action at the last minute. Tehran decided to either delay the strike or change the nature of its response to Israel's attack on its consulate in Damascus, likely due to warnings from the U.S. and President Biden. The news outlet cited Iranian semi-official news agency Mehr as claiming the attack could happen "maybe tonight," but soon after deleting the video with the assertion. Iran has warned on multiple occasions that it will "punish" Israel over the Damascus strike in which seven members of the Islamic Revolutionary Guard Corps (IRGC), including Quds Force commander Zahedi and his deputy Rahim, were killed. Israel, on the other hand, stressed it would retaliate against any strike; while Biden insisted Washington will do everything it can to protect Israel's security.

On Friday, Israel’s Defense Minister Gallant said:

·         US, Israel stand ‘shoulder to shoulder’

·         Our enemies think that they can pull apart Israel and the United States, but the opposite is true – they are bringing us together and strengthening our ties”

·         We are prepared to defend ourselves on the ground and in the air, in close cooperation with our partners, and we will know how to respond

Also, U.S. President Biden warned Iran not to attack Israel. Biden said:

·         I expect Iran will attack Israel sooner rather than later

·         My message to Iran: “Don’t”

·         We are devoted to the defense of Israel

·         We will support Israel, we will defend--help defend Israel and Iran will not succeed

On Friday, U.S. Defense Officials stated that the U.S. Navy is in the process of Rushing at least two Guided-Missile Destroyers as well as several other Ships into Positions off the Coast of Israel and in the Northern Red Sea, to provide Protection to U.S. and Allied Forces including Israel from any Iranian Attack. The US intelligence/White House noted the likelihood is that Iran counter-strikes imminently, but not at major population centers in Israel. The Israeli response still could be "devastating" to Iran, whatever that means, and that could take the conflict to a whole new level. It would, of course, also heighten the economic impact: Massive spikes in oil prices, interest rates, etc., ending any chance of Fed rate cuts, and put Biden's presidency in jeopardy.

On Friday, the White House said:

·         We will not comment on reports of an imminent Iran attack on Israel, it is a viable threat, and we're watching this very very closely

·         Iran’s retaliation a ‘real and viable threat’

·         We still deem the potential threat by Iran here to be real, to be viable

·         I would just say that we’re watching this very, very closely

·         Washington would make sure the Israelis have what they need and that they’re able to defend themselves

·         Still deem potential threat by Iran to be real and credible

·         We are still waiting on a response from Hamas after the latest round of hostage talks

·         Reports about the possibility of Iran launching an attack on Israel today, Friday, are not yet confirmed

·         We are moving additional military capabilities to the region to enhance regional deterrence and measures to protect our forces

·         Security consultations begin with the participation of Netanyahu, Galant, Gantz, and Eisenkot to discuss the possibilities of an Iranian response

·         Iran sent a message to the Biden administration through several Arab countries earlier this week: if the US gets involved in the fighting between Israel and Iran, U.S. forces in the region will be attacked

Conclusions:

Overall, Iran, the U.S./Allies, and Israel may be mow exploring a face-saving way for Iran for one & done calibrated missile/drone attack on come Israeli target directly/indirectly (most probably through some proxies), so that it would not cause Israel any real harm and also provide a face-saving image for both Iran, Israel and even US, considering their respective domestic political compulsion.

Iran, if goes for any missile/drone attack on Israel directly or indirectly, may inform its ME ally Oman/US about the probable time and location (coordinates) of the Israeli target, so that both Israel and US can take a proper defense without any human casualty well in advance (like the last Iranian-US drama we have seen a few years ago when Iran ‘destroyed’ an ‘empty’ US military base in Iraq in response of the killing of the then IRGC chief by the US). Like Iran, both Israel and the US/NATO are now not interested in launching a wider regional war, which may take the shape of a small WW-III. Also, Israel and the U.S. are now under huge public/global pressure to go for an immediate Gaza War ceasefire with a permanent two/one-state solution to this legacy Palestine issue.

Thus even a direct attack by Iran in Israeli territory may be calibrated in a manner that would not cause an all-out war despite a ‘robust response’ by Israel and the US. Israel might be able to tolerate an attack that only did some physical damage to military facilities. But if too many civilians or military personnel were killed due to any miscalculation, that may trigger a wider Israeli response and the cycle of a major regional war involving even Russia and China (against US/Israel/NATO). The U.S. has already ‘warned’ China to provide Russia with drone & missile components privately; China firms are helping Russia boost military production for the Ukraine war. Russia is not in a difficult situation right now as China, Iran, and even North Korea are supplying it with vital military equipment and parts.

Technical trading levels: DJ-30, NQ-100 Future, and Gold

Whatever may be the narrative, technically Dow Future (38242), now has to sustain over 38550 for a rebound to 39500-40000/40200-40600/40700 to 42600  levels in the coming days; otherwise, sustaining below 38500/38350-38295/38150*, may again fall to 37950/37700-37600 and 37050-35550 levels in the coming days.

Similarly, NQ-100 Future (18175) now has to sustain over 18000 for a rebound to 18500-18750 and 19000/19200-19450/19775 and 20000/20200 in the coming days; otherwise, sustaining below 18000, NQ-100 may gain or fall to around 17800/17575*-17150/16850 and 16650/16490-15900/15700 in the coming days.

Also, technically Gold (XAU/USD: 2340) now has to sustain over 2380-2415 for any further rally to 2425/2455-2475/2500; otherwise sustaining below 2410-2405, may again fall to 2375/2350 and 2320/2315-2305/2300 and 2290/2270-22245/2240, and 2220/2210-2200/2195-2190/2180 and 2175/2145*, and further to 2120/2110-2100/2080-2060/2039 and 2020/2010-2000-1995/1985-1975 and even 1940 may be on the card.