On Wednesday, May 6, during the early Asian trading session, spot gold was trading near $4,640 per ounce. Gold prices halted their decline and rebounded, trending upwards in a volatile manner. Supported by a slight pullback in the US dollar and a boost from geopolitical risk aversion sentiment, the price of gold stabilized at lower levels and strengthened, showing steady gains in the morning session. Overall, the market shifted from a weak tone to a pattern of consolidation with a slight bullish bias at lower levels, with the center of gravity gradually rising. Short-term corrective momentum for the bulls showed signs of recovery.
Reviewing recent price action, after experiencing consecutive pullbacks and touching $4,500, market sentiment gradually improved on Tuesday. Gold prices formed a pattern of dipping and then recovering, reaching a high of $4,585 during the US trading session and closing the day with a positive candle.
On the fundamental side, former President Trump issued a surprising statement via his social media platform, Truth Social, on Tuesday local time. He stated that, in light of requests from Pakistan and other nations, the "great victory" achieved by the US in military actions against Iran, and "significant progress" made in reaching a final agreement with Iranian representatives, it was unanimously agreed to suspend the "Freedom Plan," which had been activated just one day prior. This suspension is conditional on the blockade remaining fully effective. Trump indicated this move is to observe whether a final agreement can be reached and signed. This means the US will maintain its maritime blockade on Iran while pausing the "Freedom Plan" aimed at guiding vessels through the Strait of Hormuz, creating space for diplomatic negotiations.
Iran has formally initiated a new mechanism for managing maritime traffic in the Strait of Hormuz. All vessels intending to pass through the strait will receive an email from the official address info@PGSA.ir, outlining the rules and regulations for passage. Ships are required to adjust their operations according to this framework and obtain a transit permit before navigating the Strait of Hormuz. Described as a sovereign governance measure, this system is now operational in the strait, which has been under Iranian control since the early stages of the conflict.
The shift from a high-profile launch of the "Freedom Plan" to a swift announcement of its suspension marks a change in the US administration's stance on the Strait of Hormuz. The US Secretary of Defense confirmed that the ceasefire has not yet ended, while Iran stated that a state of war persists. Iraqi oil prices experienced a significant drop. Despite the ongoing military standoff, Trump's remarks regarding substantial progress in US-Iran negotiations have introduced a glimmer of hope for peace into the tense situation.
From a technical perspective, analyzing the daily chart for gold, initial resistance can be observed near the $4,650-60 zone, an area of previous congestion involving highs and lows. A break above this level could allow for a test of resistance near the 20-day moving average around $4,700. If this level is also breached, gold might break free from its short-term weak and consolidative trend, although this scenario currently has a low probability. Should it occur, it would likely depend heavily on fundamental developments and a definitive weakening trend in the US dollar. On the downside, support is seen near the 5-day moving average around $4,590. A drop below this level would suggest gold remains trapped within its overall weak and range-bound pattern, and with time, expectations for further declines would strengthen.
Looking at the 1-hour chart, the market opened with five consecutive bullish candles in the first hour. Following this significant upward move, immediate resistance is observed near the previous high at $4,660. A break above this level would target resistance near the range high at $4,700. Failure to break higher would indicate continued consolidation. On the downside, watch the support zone around yesterday's rebound high of $4,580-70.
Trading recommendation for today: Consider short-term strategies involving buying on dips and selling on rallies within the approximate range of $4,650/60 to $4,580/70. Adjust strategies accordingly later based on the ADP employment data release in the evening session.
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