Last week, international gold prices experienced a significant decline. This drop was triggered by a much stronger-than-expected non-farm payrolls report, which sharply increased market expectations for a Federal Reserve interest rate hike within the year.
During the week, spot gold opened at $4522.43 per ounce, reaching a high of $4545.95 and a low of $4311.78 before settling at $4327.77. This represented a weekly loss of $212.16, or 4.67%, marking the fourth consecutive week of declines on the weekly chart. After this four-week losing streak, gold has nearly erased all its gains for the year.
Looking ahead to the new week, market focus will quickly shift to upcoming U.S. inflation data. If the CPI or PPI figures indicate that rising energy prices are spreading into core inflation, expectations for Fed rate hikes could intensify further, potentially putting more pressure on gold and silver.
Persistent tensions in the Middle East have kept international oil prices elevated. On one hand, negotiations between the U.S. and Iran are deadlocked over significant disagreements on issues like fund unfreezing, nuclear material disposal, and compensation. On the other hand, confrontations in Gulf waters have escalated, with frequent military friction in the Strait of Hormuz and the Persian Gulf, sharply increasing navigation risks. The Lebanon-Israel conflict continues to intensify, and ceasefire talks have stalled. While these factors support firm oil prices, they present negative news for the gold market.
Simultaneously, the surprisingly strong non-farm payrolls data has quietly increased the risk of a Federal Reserve rate hike.
Data released last Friday showed that U.S. non-farm payrolls increased by 172,000 in May, significantly surpassing the market expectation of 85,000. March's figure was revised up to 214,000, and April's was revised up from 115,000 to 179,000. Combined revisions for the previous two months added 93,000 jobs, indicating the strongest three-month job growth performance in over two years. The unemployment rate remained at 4.3% for the second consecutive month, meeting expectations.
The robust employment data led investors to further scale back bets on near-term Fed rate cuts and begin repricing the possibility of a rate hike before year-end. The market has even priced in a rise in the probability of a December Fed rate hike from 48% to 63%.
Concurrently, the strength in the labor market adds extra upside risks to the inflation outlook. Considering that the U.S.-Iran-Israel conflict continues to push oil prices higher and food prices are also rising, inflation is becoming too pronounced for the Fed to ignore. The market widely expects the Fed to keep the federal funds rate target range unchanged at its June meeting, with officials' remarks on the future policy path likely to be cautious or even hawkish.
In this context, if this week's CPI or PPI data show that rising energy prices are spilling over into core inflation, expectations for Fed rate hikes could heat up further, placing greater pressure on gold and silver.
From a technical perspective, gold prices have broken below the 200-day moving average, and the 10-week moving average has formed a death cross with the 30-week moving average, suggesting near-term downside risks persist. Short-term resistance for gold is expected in the $4450-$4500 per ounce zone, with key resistance at $4600-$4650. Short-term support lies in the $4250-$4200 zone, with critical support at $4100-$4000.
For domestic Shanghai gold futures, short-term resistance is seen in the 980-1000 yuan per gram zone, with key resistance at 1040-1060 yuan. Support is at 920-910 yuan, with key support in the 900-880 yuan zone. For Shanghai silver futures, resistance is at 17,500-18,000 yuan per kilogram, with key resistance at 18,500-20,000 yuan. Support is seen at 16,000-15,500 yuan, with key support at 14,500-13,500 yuan.
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