On May 19, Monday, we noted that surging oil prices were driving up inflation, leading to increased market expectations for a Federal Reserve rate hike. The rise in the U.S. dollar and Treasury yields diminished the appeal of holding gold, directly pressuring its price. Therefore, in terms of trading strategy, it was suggested to watch for support around $4,500. A break below this level could shift focus to $4,400, while resistance was seen at $4,566, followed by $4,600 and $4,650.
Looking at the subsequent price action, gold continued to face pressure and oscillate after the Asian session opened on Monday. A brief, sharp drop pushed it to a one-month low of $4,480. However, the price quickly stabilized and rebounded, reclaiming the key $4,500 level. During the European session, it rose to encounter resistance near $4,560, with several pullbacks finding support around $4,530. After the U.S. session opened, gold extended its upward move, testing resistance at $4,584 before pulling back to find support again near $4,530. It is currently trading around $4,572. Overall, gold experienced short-term pressure but swiftly rebounded from the one-month low, with dip-buying providing support.
Analysis suggests that last week, stalled U.S.-Iran negotiations fueled concerns over potential energy supply disruptions, supporting oil prices in maintaining high volatility. Elevated oil prices intensified inflationary pressures, compelling the Federal Reserve to maintain higher interest rates for a longer period. Additionally, U.S. CPI data reached a three-year high, primarily driven by soaring energy costs. This directly dampened market expectations for a Fed rate cut within the year and bolstered expectations for further hikes. The U.S. dollar climbed to a one-month high, and the 10-year Treasury yield rose to a one-year peak, putting direct downward pressure on gold. However, gold found a bottom and rebounded early this Monday, primarily as the dollar and Treasury yields retreated from their highs, offering short-term support to the precious metal.
On the daily chart, gold declined for four consecutive days last week before stabilizing and rebounding this Monday, temporarily alleviating short-term downward pressure. Key support levels to watch include the $4,530 area, where gold found support multiple times after encountering resistance during Monday's rebound, followed by Monday's low of $4,480. On the upside, resistance is observed at Monday's high of $4,584, which the price is currently testing, followed by the daily Bollinger Band midline around $4,650. The 5-day moving average and MACD indicator show bearish crossovers, though the KDJ indicator's bearish crossover has slowed significantly, and the RSI indicator's bearish crossover is turning upward. Short-term technical indicators suggest gold may require a corrective rebound after the recent consecutive declines.
Intraday gold reference: Following consecutive gains, the U.S. dollar and Treasury yields retreated from their highs on Monday, providing short-term support for gold and allowing prices to stabilize. A range-trading approach is suggested. Support can be monitored at $4,530, followed by $4,480. Resistance is noted at the $4,584 level, with a break above potentially targeting $4,650.
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