On May 18, last Friday, we observed that the conflict between the U.S. and Iran had driven up oil prices, intensifying inflationary pressures and compelling the Federal Reserve to maintain higher interest rates for a longer duration. Additionally, the surge in energy prices pushed U.S. CPI data to a three-year high, erasing market expectations for a Fed rate cut this year. This supported the rise of the U.S. dollar and Treasury yields, directly pressuring gold prices. Furthermore, short-term technical indicators suggested a risk of further decline for gold. Therefore, in terms of trading strategy, it was advised to watch the resistance levels at $4666 and $4710, with support at $4600. A break below this level could shift focus to $4500.
Subsequent price action showed that during the European session last Friday, gold faced pressure and repeatedly tested the key $4600 level, eventually breaking downward. The price experienced a sharp drop of over $40, rebounded to encounter resistance at $4588, and then continued to fluctuate lower, finding a bottom at $4511. Thereafter, gold traded within a range of $4525 to $4565. Overall, after losing the crucial $4600 support, gold's trend remained under pressure and declined, approaching the target level of $4500, aligning largely with our earlier expectations.
Analysis indicates that after encountering resistance last week, gold prices declined for four consecutive trading days, primarily due to the convergence of multiple bearish factors. Specifically, while geopolitical tensions in the Middle East attracted some safe-haven buying in gold, concerns over potential energy supply disruptions drove oil prices sharply higher. This exacerbated inflationary pressures, forcing expectations for the Federal Reserve to maintain higher interest rates for an extended period. The impact of rising energy costs was reflected in U.S. CPI data hitting a near three-year high, directly dashing market hopes for a Fed rate cut this year. Instead, expectations for potential rate hikes gained traction, supporting the U.S. dollar and Treasury yields. This further diminished the appeal of holding non-yielding assets like gold. Influenced by these factors, gold prices faced downward pressure.
On the daily chart, gold recorded declines for four straight days last week, reaching a new weekly low, indicating relative short-term weakness. Key support below can be monitored at the $4500 level, which coincides with the lower Bollinger Band and has served as a low point during pullbacks over the past month. A sustained break below this level would increase the risk of further short-term declines, potentially targeting $4400. On the upside, immediate resistance is seen at last Friday's rebound high of $4566, followed by the $4600 level and the daily Bollinger Band midline at $4650. Technical indicators such as the 5-day moving average and MACD forming a death cross, alongside bearish signals from the KDJ and RSI, suggest continued short-term downside risk for gold.
Intraday Gold Outlook: Surging oil prices are fueling inflation, leading to heightened expectations for Fed rate hikes. The consequent rise in the U.S. dollar and Treasury yields is reducing gold's attractiveness, directly weighing on its price. A range-trading approach is recommended. Key resistance levels to watch are $4566, followed by $4600 and $4650. Support is focused at $4500; a break below this level could open the way toward $4400.
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