On Monday, May 18, the Asian session opened with spot gold immediately declining. It fell to a low below the 4500 key level, reaching 4480, before beginning to rebound. It is currently trading around $4540, close to its opening price. Last week, the gold market opened lower on Monday at 4698, initially experienced a rally, and reached a weekly high of 4773 before a strong, volatile pullback. On Friday, May 15, it suffered a significant setback, falling 2.43% to close at $4,538 per ounce, briefly touching a low of $4,511 per ounce, the lowest level since May 4. For the week, the decline reached 3.75%, closing with a long upper-shadow bearish candlestick.
Fundamental Factors: Geopolitical Aspects: The stalemate in US-Iran tensions is far from over; on the contrary, the situation continues to escalate. According to Axios, former President Trump is expected to meet with senior national security advisors on Tuesday to discuss military options against Iran. US officials indicated Trump hopes to reach an agreement to end the conflict; however, as Iran has rejected many of his demands and refused to make substantive concessions on its nuclear program, military options have been brought back to the table. A senior spokesperson for the Iranian armed forces warned that if the US renews military threats or actions against Iran, US military assets and personnel in the region will face a "new, offensive, surprising, and stormy response."
US Dollar and Crude Oil: The US Dollar Index (DXY) has risen for five consecutive trading days, climbing to 99.35 as of now, marking its largest weekly gain in two months. The dollar's strength is not coincidental; it is underpinned by the continued surge in US Treasury yields. The yield on the 10-year US Treasury note rose to 4.599%, touching a near one-year high. Brent crude oil closed at $106 per barrel, up 2.1%, while US crude oil (WTI) closed at $105 per barrel, surging 3.1%. For the week, Brent crude gained 7.3%, and US crude surged 10.3%.
Other Factors: Global gold jewelry demand has entered its traditional seasonal lull in Q2. Coupled with India raising its gold import tariffs, support from physical gold demand has weakened somewhat. According to a report, UK Labour Party leader Keir Starmer has informed close confidants of his intention to resign as Prime Minister and has established an orderly departure timeline. Last week, due to a "comprehensive surge" in US data, with several key indicators hitting multi-year highs, traders have largely ruled out the possibility of a Federal Reserve interest rate cut this year. Bets on a potential rate hike within the year have increased, though the majority expectation remains for rates to stay unchanged.
Technical Analysis: From the daily gold chart structure, gold has currently fallen back below the daily moving average band. The daily moving averages are crossing downward, both suggesting the market may be undergoing a mid-term corrective pullback. After opening today, gold once broke below the 4500 support level, offering hope for further short-term corrective declines. Early in the week, focus on short-term resistance around 4550/60. Stronger resistance is seen at the daily moving average band around 4625-50. Downside support for the week is seen at the lower edge of the descending channel, around 4420-00. If there is news-driven stimulus during the week and the dollar index strengthens significantly again, it would naturally exert strong downward pressure on gold.
Combined with the 1-hour gold chart, a rapid decline occurred after the open, reaching the 4480 level before rebounding. Technically, this rebound is a technical oversold bounce. There may be a continuation of the rebound during the day, but the upside potential remains limited. Focus on short-term resistance around 4560-70, the dense high from Friday evening's pull. If broken, then watch for a battle around 4600-10. Downside extension during the day might be limited for now; continue to monitor the battle around 4500. If the market chooses to decline again after consolidation, a break below 4500 could lead to a test of the 4420-00 area.
Today's Trading Suggestion: Early in the week, consider a light short position on a rebound to around 4560-70, with a preliminary stop-loss above 4580. Target a partial profit take at 4530-20 initially, hold the remaining position to watch the battle around 4500, and retain some position for the expectation of an extended correction towards 4420-00 later. If the rebound breaks above 4580, it is also advised not to chase the long side for now. Instead, consider a short attempt upon testing resistance near 4600, with a stop-loss above 4620. Specific strategies should be adjusted based on real-time market conditions.
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