Gold prices continued their sharp downward trajectory yesterday, June 25th, opening lower during the Asian session and declining further. While a short position was stopped out earlier in the day, a subsequent drop during the European session provided a fresh entry point for a short at 4070. After breaching the 4000 mark, the price hit a recent low of $3958 during the US session, allowing the short position to be closed manually at 3990 for a substantial profit of $70 after accounting for the earlier loss. Gold ultimately closed at $3998, marking two consecutive days of bearish closes.
On Thursday, June 25th, market sentiment has begun to price in potential rate hikes in September or even December. Persistently high US Treasury yields, a US dollar index surging to 101.5-102 (a near 13-month high), and a significant increase in the carrying cost of non-yielding gold have led to continuous outflows from gold ETFs. Progress in US-Iran engagement/ceasefire intentions and the normalization of oil tanker traffic in the Strait of Hormuz have pushed crude oil prices back to pre-conflict levels. The "war premium" that had previously driven gold higher is being rapidly unwound as concentrated buying for safe-haven purposes exits the market.
Tonight's key event is the release of the US May Core PCE Price Index at 20:30, the Federal Reserve's preferred inflation gauge, with an expected year-on-year reading of approximately 3.4%. The implications are clear: a reading higher than expected (＞3.4%) would rekindle rate hike expectations, pressuring gold further, potentially breaking below 3960 towards 3930-3900. A reading in line with expectations (≈3.4%) would likely maintain a weak consolidation range between 3960 and 4030. A reading lower than expected (＜3.3%) would signal cooling inflation, potentially triggering a short-term technical rebound from oversold conditions, but this would likely be a temporary pause within a broader downtrend, unlikely to alter the medium-term bearish outlook.
From a technical perspective, after gold broke below the key 4000 level overnight, the subsequent decline was not excessively extended, yet the rebound was also limited. This suggests the market views the break below 4000 as valid. The 20-period moving average on the hourly chart now presents a short-term resistance level today. Therefore, the primary bias for gold today is likely to remain weak, though the potential for further downside may be limited in terms of both space and momentum. Immediate resistance to watch is around 4020-25, which coincides with the 20-hour MA, last night's rebound high, and a previous support area; its status will significantly impact short-term sentiment. Initial support lies near the lower boundary of the hourly chart's recent range around 3960/50. If the price consolidates below 4000 for an extended period, expectations for a further downward extension will increase.
In summary, the PCE data is pivotal for gauging the Fed's next move. Any judgment before the data release is merely speculative. The biggest pitfall today would be the temptation to try and catch the bottom. Neither macro fundamentals nor capital flows currently support a strong rally, making selling into rebounds a much safer strategy. Expect high volatility around the PCE release, so setting stop-losses and protecting capital is paramount.
Key Economic Data and Events for Thursday, June 25th:
20:30 US Initial Jobless Claims for the week ending June 20
20:30 US Core PCE Price Index (YoY) for May
20:30 US Personal Spending (MoM) for May
20:30 US Real GDP Annualized QoQ (Final) for Q1
20:30 US Real Personal Consumption Expenditures QoQ (Final) for Q1
20:30 US Core PCE Price Index QoQ (Final) for Q1
20:30 US Core PCE Price Index (MoM) for May
20:30 US Durable Goods Orders (MoM) for May
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