Gold prices extended their weakness in early Asian trading on Wednesday, June 24th, following the previous session's decline. The precious metal is currently trading around $4,060. The market opened at $4,192 on Tuesday, saw a brief rally to $4,198, then experienced a sharp sell-off, reaching a low of $4,090 before consolidating. The session closed at $4,109, forming a long-legged bearish candlestick on the daily chart. This decline is not an isolated event but the combined result of a strong US dollar rebound, an unexpected easing of Middle East geopolitical tensions, and a hawkish shift in Federal Reserve monetary policy.
Key Fundamental Drivers
On the geopolitical front, Oman issued a statement in the early hours of the 24th, local time. Citing its responsibility for the Strait of Hormuz and the waterway's critical importance to the global economy, and in compliance with international law and the UN Convention on the Law of the Sea, Oman announced the opening of a temporary maritime route for all vessels, ensuring freedom of passage without fees. This move follows diplomatic efforts between the US and Iran. Separately, Lebanon's Hezbollah stated that Israeli attacks on southern Lebanon violated the ceasefire agreement, insisting that Israel's withdrawal must proceed according to the agreed timetable. Israel has not yet responded.
Regarding the Federal Reserve, according to the CME FedWatch Tool, the probability of the Fed holding rates steady in July is 62.6%, with a 37.4% chance of a 25-basis-point hike. For September, the odds of unchanged policy are 29.8%, while the probability of at least one 25-bp hike is 70.2%, including a 19.6% chance of a 50-bp hike. By December, the likelihood of unchanged rates is 13.8%, with an 86.2% probability of at least one 25-bp increase and a 49.7% chance of at least a 50-bp hike.
In terms of data, the US Dollar Index surged 0.37% on Tuesday, hitting a high of 101.43, marking its highest level in over a year. Brent crude oil fell 1.38% to $76.62, while WTI crude dropped 1.38% to $73.66, both touching near four-month lows. The upcoming release of the US May Personal Consumption Expenditures (PCE) Price Index on Thursday is a key market focus, as it is one of the Fed's preferred inflation gauges. A stronger-than-expected PCE reading could further reinforce bets on interest rate hikes, applying additional downward pressure on gold.
Technical Analysis Overview
From a daily chart perspective, gold has continued to trade below its 5 and 10-day moving averages this week without showing any significant breakout attempts. Yesterday's renewed decline and the breach of the $4,090 level suggest the potential for further downside extension in the short term. For the latter half of the week, the focus remains on the lower boundary of the anticipated daily range and the trendline support, which has now shifted down to near the key $4,000 psychological level. This reinforces the view that gold is currently in a weak technical state.
If gold experiences a technical rebound today, resistance near the 5-day moving average around $4,150 will be crucial to watch. A successful break above this level could introduce short-term uncertainty, while a failure to reclaim it significantly increases the probability of a move toward $4,000.
Hourly Chart Analysis
Looking at the one-hour chart, gold saw a recovery during the European and US sessions yesterday but faced renewed resistance at $4,145, leading to another decline in late trading. With today's price action breaking below yesterday's low of $4,090, the next target becomes the $4,000 level. However, the hourly chart shows signs of oversold conditions and a bullish divergence, which may limit the downside momentum in the near term. Initial support is seen around $4,050, but the primary support zone lies between $4,020 and $4,000.
On the upside, immediate resistance is found in the $4,110-$4,115 area, followed by the overnight high near $4,145. As long as the price remains below $4,150, the technical conditions and outlook continue to favor further declines.
Today's Trading Strategy
For today's session, consider short positions on a rebound toward the $4,110-$4,115 area. Additional short exposure can be added lightly if the price tests the $4,140-$4,145 resistance zone. A unified stop-loss should be placed above $4,150. Initial profit targets are set below $4,090, at which point the stop-loss can be moved to breakeven. Consider taking partial profits on any decline toward the $4,060-$4,050 area. The remaining position can be held to target the $4,030-$4,020 zone and the key $4,000 level for further action.
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