The spot gold price experienced a volatile session during Thursday's early Asian trading, initially falling, then rising, before declining again. It touched a low near $4,024, approaching a seven-month low, and briefly tested the key $4,000 psychological level. The price reached a high of $4,118 and is currently trading around the opening level of $4,070.
In the previous session on Wednesday, the gold market continued its downward trajectory. Opening at $4,255, the price saw consecutive declines throughout the day, reaching a daily low of $4,067 before consolidating. It ultimately closed at $4,070, forming a large bearish candlestick with a daily decline of 4.4%.
Key Market Drivers
On the geopolitical front, reports emerged late Wednesday that two additional demands from former U.S. President Trump were delaying a potential agreement. Concurrently, the former President issued a strong statement warning of "severe strikes" if negotiations failed. This rhetoric was swiftly followed by action, as U.S. forces, reportedly acting on orders, launched a new round of strikes on targets including air defense systems and radar stations near the Strait of Hormuz. In response, Iran's military command announced the closure of the Strait of Hormuz, declaring any vessel attempting passage a target, and reportedly launched missiles and drones at nearby U.S. vessels.
On the data front, alongside geopolitical tensions, pressure emerged from the latest U.S. inflation figures. The Labor Department reported that the May Consumer Price Index (CPI) rose 4.2% year-over-year, marking the highest level since April 2023. While this met market expectations and did not significantly increase the likelihood of a Federal Reserve rate hike this year, it contributed to a complex environment. The U.S. Dollar Index initially weakened after the data release but later fluctuated higher, closing near 100.04. Treasury yields edged up, with the 10-year yield rising to 4.54%. Oil prices, boosted by geopolitical factors, closed over 3% higher on Wednesday. Brent crude settled at $93.74 per barrel, up 2.88%, while U.S. crude settled at $92.69 per barrel, up 3.36%. The combination of a strong dollar, rising oil prices, and a high-inflation environment is inherently negative for gold. Later today, market participants will focus on the U.S. weekly initial jobless claims and the May Producer Price Index (PPI) year-over-year data.
Technical Perspective
From a daily chart perspective, the gold price has been oscillating below the daily moving average band since late May, with multiple failed attempts to break higher. Therefore, the sustained decline since last week is not surprising. However, yesterday's break below the previous low of $4,100 exceeded expectations, though the move was amplified by news-driven factors. The current bearish momentum is evident. While technical indicators show signs of being oversold, a trend-reversing rebound is unlikely under the influence of prevailing news. Consequently, any near-term bounce should still be viewed as a technical rebound from an oversold condition. In the short term, resistance is seen around the 5-day moving average near $4,210, which is also near the previously expected support line of the descending channel. If the price remains below $4,200 for an extended period, it would confirm a medium-term weakening trend for gold, potentially opening the path towards $3,900.
Examining the one-hour chart, gold experienced another emotional sell-off after today's open, dropping to around $4,020 before rebounding. However, the rally encountered resistance near the 20-period moving average on the hourly chart around $4,120. This pattern suggests the market is oversold in the short term, but any bounce is merely a corrective rebound insufficient to reverse the trend. Therefore, the primary intraday view remains one of continued adjustment. The price action may evolve into wide-range consolidation at low levels or a rebound to test resistance. As long as the price does not reclaim territory above $4,200, the technical bias remains weak. Nonetheless, close attention must be paid to potential disruptions from news flow.
Trading Strategy for Today
During the Asian/European session, consider a light short position on a rebound to the $4,100-$4,120 area, with a stop-loss set above $4,135. The initial target is around $4,070 for partial profit-taking and moving the stop-loss to breakeven. Hold the remaining position with a view towards $4,030 or even $4,000. Alternatively, if the price retreats again to the $4,020-$4,000 zone, a light long position could be attempted. Specific strategies should be adjusted based on real-time market conditions.
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