On June 26th: In the previous trading session on Thursday, June 25th, international gold prices found a bottom and closed higher, driven by U.S. inflation data largely meeting expectations and comments from Federal Reserve official Williams suggesting inflationary pressures are expected to ease. This alleviated concerns about imminent Fed rate hikes, leading the U.S. dollar index to halt its three-day rally and close lower, preventing gold from falling further to new lows. While short-term expectations point to consolidation or a rebound, gold still faces downward pressure next week until it reclaims the 60-week moving average, with risks of testing the $3,900 or $3,800 levels.
In specific price action, gold opened the Asian session at $4,003.97 per ounce. It remained under pressure and consolidated throughout the day, initially recording a daily low of $3,963.57. During the U.S. session, buying momentum picked up, pushing prices higher to a daily peak of $4,043.95 before a slight pullback to close at $4,026.54. The daily trading range was $80.38, resulting in a gain of $22.57, or 0.56%.
Looking ahead to Friday, June 26th, international gold opened with narrow fluctuations, showing some potential for a stronger rebound. The U.S. dollar index's initial strength in early trading applied some pressure. However, the dollar's consolidation and lower close yesterday suggest its upward momentum is waning in the short term, and its weekly chart faces resistance at the 200-week moving average. This implies limited downside for gold. Any further declines could find significant support and a potential bullish rebound around the $3,700 level.
The market will focus on data releases today, including the final reading of the University of Michigan Consumer Sentiment Index for June and the final one-year inflation expectations for June. Market expectations lean towards a negative impact on gold prices. However, judging by yesterday's U.S. session performance, the likely outcome is further consolidation or a rise. The key focus remains on this week's closing levels.
On the fundamental front, analysis suggests that U.S.-led military action against Iran in late February heightened tensions in the Strait of Hormuz, causing oil prices to spike near $120. In the May U.S. PCE data, a 6.5% surge in gasoline and other energy goods prices was a significant driver of inflation, bolstering the Fed's rate hike outlook and pressuring gold prices lower.
However, with the U.S. and Iran signing a preliminary peace agreement, oil prices have retreated to pre-conflict levels and shipping volumes are nearing normal, providing potential support for inflation to have peaked.
Consequently, although the latest annual PCE inflation reading hit a multi-year high, the month-over-month growth rate was slightly below some expectations. The fact that the pass-through effect of energy prices has not fully materialized provided some relief to the market, also reducing the probability of rate hikes in September and December, allowing gold bulls to regain some confidence.
Nevertheless, risks and attacks persist in the Strait of Hormuz, and oil prices rebounded strongly yesterday. The Iranian Revolutionary Guard's reiteration of control over the strait further fuels market concerns about energy supply stability. Such geopolitical uncertainty continues to support inflation prospects and rate hike expectations, which will limit gold's upside. Therefore, until rate hike expectations continue to diminish and are fully priced in, or until technical levels reach a collective market entry point for bulls, the market is likely to remain in a corrective phase.
From a technical perspective, on the monthly chart, gold continues its downward momentum, moving further away from the resistance of the 5- and 10-month moving averages and the uptrend line. Increased bearish force suggests the potential for further corrective declines towards the support of the middle Bollinger Band around $3,760.
On the weekly chart, gold has been trading below the 5- and 10-week moving averages for several weeks, indicating a weak trend. The price has broken below the support of the 60-week moving average and continues to decline, increasing bearish pressure. This week's price action touched the lower Bollinger Band around $4,000 as anticipated. If the price fails to reclaim the 60-week moving average this week or next, a further decline towards the support of the 100-week moving average around $3,600 is likely in the near term, which could then present an opportunity for a long position targeting a phased rebound.
On the daily chart, gold found support and rebounded from its lows yesterday without setting a new low, indicating a slowdown in bearish momentum and some short-term rebound demand. However, the overall trend remains downward and under pressure. The short- and medium-term moving averages above are still in a bearish alignment, and the trend has not reversed. Therefore, any rebound still faces the risk of a pullback from moving average resistance.
Gold: Support levels to watch are around $4,000 or $3,970; resistance levels are around $4,060 or $4,090.
Silver: Support levels to watch are around $56.80 or $55.50; resistance levels are around $59.00 or $60.00.
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