Gold Reverses Friday's Gains on USD Upside
Another frustrating start to the week for gold bulls. Both gold and silver prices have started the week under pressure amidst the renewed buying we’ve seen in USD following Friday’s May CPI release. US inflation was seen surging back to highs last month. On the back of the softer figures seen in April, traders were keen to see if inflation would moderate further. However, with both headline and core readings coming in above expectations, the focus is now firmly back on hawkish Fed expectations ahead of the June FOMC on Wednesday.
Gold prices had been higher initially on Friday in response to the data but have since reversed around 50% of those gains. With the Dollar storming ahead this week, and the FOMC likely to add further demand impetus, the near-term outlook for metals looks skewed towards further losses. Weakness in equities markets is likely offsetting the impact of the stronger Dollar, to some extent.
The tone of Wednesday’s meeting will be a big catalyst for directional moves in metals across the rest of the month. If the Fed remains steadfast in its hawkish outlook, USD will continue higher, weighing on metals near-term. If the Fed is seen describing any caution in its outlook, with regard to rate hikes beyond July, this would likely fuel some easing in USD, allowing metals prices to gain ground near-term. Ahead of the FOMC we also have US May retail sales which hold the potential to create USD, and therefore metals, volatility also.
Technical Views
Gold
The rally off the 1791.63 level lows has seen gold prices trading back up into the upper portion of the bear channel which has framed the move lower from YTD highs. Recently, price has been stalled along resistance at the 1871.04 level. With both MACD and RSI bullish, the prospect of a breakout higher above the level (and the channel top) is worth noting. Such a move would put the focus on 1919.92 next.
Silver
The rejection at the latest test of the 22.3205 level, and retest of the broken bullish trend line, has seen silver prices turning lower once again. For now, prices are sitting on support at the 21.4525 level. While both MACD and RSI are still bullish, both indicators are turning lower, highlighting risks of a fresh drop towards the current YTD low around 20.5023 and 19.5643 below that.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.