Spot gold fell sharply on Monday, losing nearly 2.5% of its value until early US session, in the biggest daily drop since Mar 9.
Red-hot US inflation in May added to strong concerns about the negative impact on the economy, as price growth so far does not show any signs of easing that fueled expectations of more aggressive Fed in its June policy meeting, due later this week.
Although the metal is used as a hedge against inflation, strong rise of the US dollar on rally into safety against the signs of worsening global crisis and expectations that the US central bank would opt for stronger rate hike this time, keep the gold price in defensive.
Markets widely expect the Fed to raise interest rate by 0.5% to 1.5%, but the number of those who bet on 0.75% hike is rising and lifted the greenback to one-month high and pressuring 2022 high.
Fresh bearish acceleration weakened the technical picture on daily chart as 14-d momentum surged into negative territory and moving averages turned to bearish setup, while the action remains weighed down by falling and thickening daily Ichimoku cloud.
In addition, today’s action is on track to leave a bearish engulfing pattern on daily chart and generate another bearish signal.
Bears broke below 50% retracement of $1786/$1879 upleg, with daily close below this level to add to bearish near-term stance, as pivotal supports at $1825/22 (Friday’s low / Fibo 61.8%) are under pressure and break lower would signal an end of corrective phase.
Markets focus on US Producer prices and retail sales, ahead of key event this week – FOMC policy meeting.
Res: 1832; 1842; 1849; 1857
Sup: 1825; 1822; 1808; 1800
