Expected to Maintain Equilibrium Before Rate Cuts

Central Bank

Economic

Summary:

The Fed's hawkish stance has overshadowed the moderate U.S. inflation report, leading to technical selling in the precious metals market. We expect gold prices to remain balanced until a rate cut occurs.

SELL XAUUSD

Close Time

CLOSED

2329.13

Entry Price

2200.00

2365.00

4455.78 -38.86 -0.86%

85.9

Pips

Profit

2200.00

2320.54

Exit Price

2329.13

Entry Price

2365.00

Fundamentals

During Thursday's New York session, gold prices experienced a significant decline nearing last week's lows, influenced by a stronger U.S. dollar and bond yields. Wednesday saw technical selling in the precious metals market as the Fed's hawkish stance overshadowed mild U.S. inflation reports, resulting in bearish sentiment towards gold in the near term.

While U.S. economic data indicates easing inflation, which is expected to lead to lower interest rates, hawkish officials remain cautious. A decrease in interest rates would positively impact gold, as the opportunity cost of holding this non-yielding asset would decrease. However, the timing and extent of the rate cuts are still uncertain.

The U.S. Producer Price Index (PPI) data released on Thursday provided more evidence of easing inflationary pressures, suggesting that the Fed might act to cut rates in the short term.

For the gold market, we believe that the delay in the timing of the Fed's rate cuts may imply that the trade on rate cut expectations is not yet over. Amidst repeated expectations, gold prices could continue to benefit from the speculative market's advanced pricing of rate cuts. Additionally, geopolitical events and the U.S. elections could increase market uncertainty.

We expect gold prices to remain balanced until rate cuts occur. Considering that speculative positions in the gold market are already high, the maximum short-term downside for gold prices could be in the range of $100-$200. For the second half of the year, we believe that speculative trading on rate cut expectations may continue to suppress gold prices.

Expected to Maintain Equilibrium Before Rate Cuts_1

Technical Analysis

Gold's decline on Thursday aligns with expectations, as all key factors driving gold prices remain supportive. We foresee that a range-bound trading strategy is reasonable under current conditions.

However, the overbought conditions in the monthly chart, coupled with long upper shadows in the monthly candlesticks for April and May, indicate that further upward movement may be restricted. Meanwhile, the bullish momentum observed during the European session on Thursday appears to be losing steam. This suggests that gold prices may continue to consolidate within a downward channel, remaining below $2,345 to keep bearish momentum intact and potentially leading to a monthly decline by the end of this month.

Trading Recommendations

Trading Direction: Short

Entry Price: 2335

Target Price: 2200

Stop Loss: 2365

Valid Until: 2024-06 - 28 23:55:00

Support: 2314, 2305, 2300, 2291

Resistance: 2330, 2342, 2345, 2365

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