On July 1st, our analysis from the previous Tuesday suggested that a significant surge in market expectations for a Federal Reserve rate hike was supporting the US dollar's strength, directly suppressing the gold price. Short-term technical indicators also showed that while gold exhibited a need for a corrective rebound after a continuous decline, bearish forces remained dominant, likely limiting any upside. Therefore, we advised focusing on resistance around $4,040; a sustained break above this level could open a path towards $4,100. Support levels to watch were $4,000 and $3,960, with a potential further decline towards $3,900 if pressure persisted.
Looking at the subsequent price action, on Tuesday during the European session, gold's rebound was halted at $4,037. After the US market opened, gold dipped to find support at $4,008, then broke above the near-term resistance around $4,040, reaching a daily high of $4,063. However, the rally quickly lost momentum and failed to achieve a decisive breakout, with the price closing near $4,006, barely holding the key $4,000 level. On Wednesday's open, gold continued its oscillating decline, finding a footing at $3,960 and is currently trading around $3,988. Overall, gold's rebound was constrained, leading to another decline that reached our identified target of $3,960, aligning largely with our expectations.
Market analysis indicates that Tuesday's failed rebound and the continued decline into Wednesday are primarily driven by the significantly heightened expectations for a Fed rate hike, which remains the key factor pressuring gold prices. Specifically, Tuesday evening's US Consumer Confidence data came in below expectations, sparking concerns that slowing consumption could drag on the economy. This caused a brief, sharp drop in the US dollar, which nearly breached the 101.00 level, and propelled a short-lived spike in gold to its daily high. However, concurrently released US JOLTs Job Openings data for May exceeded forecasts, hitting a two-year high of 7.594 million. Combined with the earlier core PCE inflation reading climbing to a three-year high of 4.1%, this data collectively points to a persistently tight labor market. This environment provides the Federal Reserve with little justification for cutting interest rates. Consequently, the US dollar rebounded from its intraday lows after the initial drop and continued to gain on Wednesday. The stronger dollar directly weighed on gold, leading to further price declines.
On the daily chart, gold's rebound was limited, followed by another retreat, indicating the overall trend remains biased to the downside. For support, the Tuesday low around $3,960 is a key level to watch; a break below could target the $3,900 round number, which is also near the lower Bollinger Band on the weekly chart. Resistance can be seen near Wednesday's high around $4,020, where the price faced repeated rejections during the morning rebound, followed by Tuesday's high near $4,060. Technical indicators like the 5-day moving average and MACD maintain bearish crossovers pointing lower, while the RSI also shows a bearish crossover. The KDJ indicator, though showing a slight upward hook, remains in a weak zone overall. These signals suggest bearish dominance continues, with gold facing the risk of another leg down.
Intraday Outlook for Gold: The persistently tight US labor market leaves the Federal Reserve with no compelling reason to cut rates. The resulting market expectations for further rate hikes continue to underpin the US dollar's strength, thereby exerting downward pressure on gold prices. A range-trading approach is recommended for operations. Key resistance levels to monitor are $4,020 and $4,060, while support levels are at $3,960 and $3,900.
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