On May 20th, gold prices experienced a decline. The Asian session opened with a rise, reaching a high of $4588. Towards the end of the Asian session, prices fluctuated around $4560, presenting a short-selling opportunity. Subsequently, during the US session, a sharp drop breached the $4500 level, hitting a low of $4464. The short position was automatically closed with a profit at $4480, securing a gain of $80. The decline did not extend further, and gold ultimately closed at $4481, forming a bearish candlestick on the daily chart.
Wednesday, May 20th, saw market volatility driven by conflicting signals regarding negotiations—US Vice President Vance claimed "significant progress" in US-Iran talks, while mediators indicated little advancement, with Iran holding firm on its core demands. This contradictory messaging prompted a risk-off move, compounded by a stronger US dollar amid rising expectations for interest rate hikes, leading to a significant drop in gold prices.
The Federal Reserve has entered a new phase, and market pricing for a more hawkish stance continues. The probability of a December rate hike has surged to 75%, reflecting a near-certain expectation. As noted by some analysts, the Federal Reserve's meeting minutes this week are a key variable. If the minutes continue to emphasize inflation risks and policy patience, real interest rate constraints may continue to weigh on gold. Additionally, the formal swearing-in of the new Federal Reserve Chair on Friday is in focus. Given his historically hawkish remarks, markets are concerned that new leadership could bring stricter liquidity tightening measures.
Technically, after breaking below $4500 overnight, gold saw a brief rebound from around $4465, but the recovery was limited, indicating weak bullish sentiment. This led to another emotional pullback in early trading today. Intraday resistance is seen near $4510, with stronger resistance around the $4525-30 area where the overnight breakdown occurred. It is expected that prices may oscillate below $4500 today. Any rebound could be viewed as an opportunity to re-enter short positions. If the downtrend extends, support around $4420-4400 will be tested. Whether the medium-term decline will deepen further will depend on external factors.
In summary, gold is currently facing dual pressure from rising US Treasury yields and a stronger US dollar. Any rebound, in the absence of a clear decline in yields or a softening tone from the Federal Reserve, is more likely to be a corrective move rather than a reversal. Attention should be paid to economic data or the wording of the Federal Reserve meeting minutes during the US session. Mentions of "rate hikes" or "persistent inflation" could trigger another decline; conversely, a more dovish tone might prompt an oversold rebound.
Therefore, the following trading strategy is suggested for the day: Gold: Sell between $4475-4480, with a stop-loss at $4490, targeting $4400-4350.
Key economic data and events to watch on Wednesday, May 20th: 21:15 Speech by a Federal Reserve Governor 02:00 (next day) Release of Federal Reserve Monetary Policy Meeting Minutes
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