On May 21st, following Wednesday's trading, our analysis indicated that former President Trump's remarks suggesting potential renewed strikes against Iran had supported oil prices. This heightened inflation concerns, potentially leading the Federal Reserve to maintain higher interest rates for a longer duration, which in turn boosted the US dollar and Treasury yields, creating short-term downward pressure on gold prices. Our operational advice was to watch the support level around $4,460. A break below this could target $4,400, while resistance was observed at $4,514 and $4,530. A further rebound would alleviate short-term selling pressure, with the next key level at $4,588.
Subsequent market movements showed that on Wednesday, gold opened in the Asian session with a minor rebound, encountering resistance at $4,509 before resuming its decline to a new low of $4,453, its weakest level in over a month. However, prices quickly stabilized and rebounded, reclaiming the $4,460 support level. After the US market opened, gold faced resistance again at $4,506, dipped to find support at $4,467, and then experienced a sharp rally to $4,552. After a minor pullback, prices tested the $4,550 level again before the close. Overall, gold stabilized near our identified $4,460 support, rallied to recover all losses from the beginning of the week, and eased its short-term downward pressure.
Market analysis suggests the initial pressure on gold early in the week, extending last week's losses, was primarily driven by continued gains in oil prices. This exacerbated inflation fears, forcing the market to price in a longer period of elevated Fed rates. Consequently, the US dollar hit a one-month high, and the 10-year Treasury yield reached a one-year peak, diminishing the appeal of non-yielding gold and directly weighing on its price. The reversal on Wednesday was triggered by the US Senate passing a resolution (following seven previous failed attempts on similar measures) that would compel the withdrawal of US troops deployed against Iran. Hours later, Trump stated the Iran war would end soon. Additionally, shipping traffic through the Strait of Hormuz showed gradual improvement, with last week's volume doubling from the prior week. Iran also reported 26 vessels transited the strait in the past day. These factors collectively led to a significant drop in oil prices on Wednesday, with Brent crude hitting a one-week low, which provided support for gold's ascent.
On the daily chart, gold's rebound from lows on Wednesday recovered the week's losses and alleviated short-term bearish pressure. Key support is now seen at the 4-hour Bollinger Band midline at $4,524, which also aligns with the post-rally pullback low from Wednesday. Further support lies at the psychological $4,500 level. A break below these levels would increase short-term downside risks, with attention turning to the 4-hour Bollinger Band lower band at $4,460. Immediate resistance is at Wednesday's high of $4,552. A break above could target this week's high of $4,588, coinciding with the 4-hour Bollinger Band upper band, and further strength would aim for the daily Bollinger Band midline at $4,620. Technical indicators show the 5-day moving average and MACD death cross slowing, while the KDJ and RSI death crosses are turning upward, suggesting a stabilization after consecutive declines and a potential need for a corrective rebound.
Intraday outlook for gold: The US Senate resolution compelling troop withdrawal from Iran, followed swiftly by Trump's comments about ending the war soon, coupled with improving Strait of Hormuz shipping traffic, directly caused Wednesday's sharp decline in oil prices, providing a foundation for gold's rise. A range-trading approach is recommended. Support levels to watch are $4,524 and $4,500, followed by $4,460. Resistance levels are at $4,552 and $4,588, with further resistance at $4,620.
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