The Gold market’s controlled and limited price action was continued for another week, leaving traders in a rather puzzled state. It is possible that Gold maybe shying away from major price action due to contradicting forces in the economy, that are holding traders back. In this report we will cover important subjects that traders could be drawn towards when trading Gold. We will also provide a technical analysis providing our personal view on key levels and possible trends.
Gold continues to oppose the USD and their contrarian nature seems to endure for the past several weeks. Monitoring the Dollar Index which measures the strength of the USD against a few other major currencies, we notice the price action headed lower but then regained some ground in the past two weeks. Accordingly, but on the opposite side, Gold prices advanced and then ended in red territory for the past two weeks providing evidence that the two instruments may be moving in a different direction in the short term. Thus, in this case, finding what exactly is moving the USD could provide more chances of predicting Gold’s movement. For example, last week’s economic data from the US including the Consumer Confidence, the ISM Manufacturing PMI, and the employment report came out better than expected giving reasons for traders to create support for the USD and short sell the yellow metal upon release. These economic readings could create opportunities for Gold traders and are in our opinion worth monitoring.
On another front, an interesting report by Bloomberg claimed Bullion has good chances of advancing in the current year. The report referenced the extremely high inflationary pressures, the worries over a possible economic slowdown and geopolitical tensions as some of the reasons backing a potential move of Gold prices to higher grounds. Yet according to Federal Reserve Governor Christopher J. Waller the economic circumstances may not be so gloomy looking forward. Governor Waller stated in his speech in the past week that despite a slowing of the GDP rates at the start of 2022, the U.S. economy continues to operate at a healthy pace. He named both “consumer spending and business investment as solid, and viewed the latest data leaning towards solid demand and continuing momentum in the economy that will sustain output growth in the months ahead”. For the past two consecutive months, Gold prices have dropped to new lows indirectly telling us that the market may not be focusing on what is making headlines in the media and the uncertainty. The US economy continues to enjoy a tight employment market with reference to the most recent report while the impact of the Fed’s recent interest rate hikes may have not been fully digested until this moment.
Yet the financial releases coming up in the following days are key in determining volatility for the Gold market. On the 9th of June we get the weekly initial jobless claims figure that seems to remain very near the 200k barrier. On the 10th of June, we get the US inflation data for May which is expected to be closely monitored by market participants. The release of the CPI and Core CPI rates have the potential of creating large price swings for Gold, thus we would suggest that traders be mindful of the risks when engaging the market. Finally, also on Friday we get the high ranking Preliminary UoM Consumer sentiment for June.
Technical Analysis
XAUUSD Daily
Gold continues to trade in a sideways motion between the (R1) 1865 resistance and the (S1) 1830 support level. This range is currently highlighted with yellow on our chart and has been used since the 19th of May. If the price action breaks above this range, we could see the trend surging to the (R2) 1895 level and even higher we note the (R3) 1920 barrier. If the trend turns downwards, we may see a drop towards the (S2) 1810 support while the (S3) 1785 line can also be engaged if the selling persists further. For now, the RSI seems to be stabilizing nearby the 50-level providing us with some evidence for an indecisive market. Our personal view is for a sideways bias while a clear breach above the (R1) could act as a signal for further bullish interest. Please note Gold has been trading in a wider sideways motion between the (R3) 1920 barrier and the (S3) 1785 line since late April, testing all the above mentioned levels during this timeframe.
