On Monday, June 8th, during the early Asian trading session, spot gold initially rose before falling, briefly touching a new low since March 24th at the key $4300 level. The price has since recovered somewhat and is currently trading around $4320.
Last week, the gold market opened at $4522, experienced a minor rally to $4546, and then fluctuated lower. Following Friday's robust US employment data, the market saw a sharp sell-off. The weekly low reached $4311 before consolidation, with the week closing at $4327. This resulted in a weekly candlestick characterized as a large bearish candle with a slightly long lower shadow.
Key Fundamental Drivers
Regarding economic data, the US Non-Farm Payrolls report for May released last Friday significantly exceeded expectations. Job growth came in at 172,000, far surpassing the market forecast of 85,000, with upward revisions to the prior two months' data. The unemployment rate held steady at a low 4.3%, and wage growth remained stable. Following the data release, market expectations for Federal Reserve interest rate cuts were completely upended. The US Dollar Index broke strongly above the 100 level, and the 10-year US Treasury yield surged above 4.5%. This significantly increased the opportunity cost of holding non-yielding gold, directly triggering a cliff-like drop in its price, with international gold plummeting over 3% in a single day.
On the geopolitical front, Israel conducted airstrikes on the southern suburbs of Lebanon's capital, with Iran responding via a missile attack. Former US President Trump suggested Iran should accept the situation and Israel should refrain from further retaliation. However, this morning, the Israeli military stated its air force had struck military targets of the Iranian regime in western and central Iran. Iran has denied agreeing to transfer part of its enriched uranium to a third country. Russian President Putin rejected Ukrainian President Zelenskyy's proposal for talks, deeming it meaningless. Additionally, the OPEC+ group of seven nations announced an increase in their production target by 188,000 barrels per day starting in July.
Technical Perspective
From a technical standpoint, observing the daily chart structure for gold, the recent weakness is not surprising. Last week, the price consistently oscillated below the moving average band, indicating an overall bearish bias. Prior analysis had suggested a technical pullback was likely. On Friday, aided by the NFP data, bearish momentum intensified, pushing the low near the support level at the lower boundary of the expected range, even lower than anticipated. This demonstrates the strength of the bearish momentum. In the short term, the price may find support due to being oversold, but the likelihood of a strong reversal and rebound is extremely low. Therefore, the primary outlook for this week remains a continuation of the corrective move, while allowing for a technical rebound to test resistance levels.
Short-Term Outlook and Trading Strategy
Analyzing the one-hour gold chart, the price declined again after today's opening, briefly reaching the $4300 level. This indicates that bearish sentiment in the market remains strong. Early in the week, price action may oscillate above $4300, potentially with a rebounding move, but the magnitude is not expected to be significant. Resistance above can be monitored around the previous low near $4365. If the price fails to sustain above this level, gold is likely to extend its decline. A break below $4300 could potentially push the low towards the $4260-50 area.
Trading recommendations for today are as follows: 1) If the price rebounds early in the week to test resistance at $4350 or $4360-65, aggressive traders could consider light,分批 short positions, with a unified stop-loss set above $4380. The target would be $4300, at which point the stop-loss could be moved to breakeven or partial profits taken, with further downside potential towards $4260-50 for full exit. 2) Early-week trading may involve repeated tests and struggles around the $4300 level, possibly including a rebound. Support may also emerge around $4260-50. However, it is advisable to avoid initiating long positions based solely on technical expectations. Any consideration for long positions should strictly be founded on supportive fundamental news developments.
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