Will gold stage a midnight riot? It depends on this position!

Golden10 Data ·  Jun 12 10:27

Will CPI and the Federal Reserve trigger a gold market explosion? Will tonight be a midnight horror or a midnight frenzy? Both bulls and bears need to pay attention to this important trend indicator.

The upcoming US May CPI report and the FOMC decision by the Federal Reserve are the focus of traders' attention. TD Securities analysts pointed out that gold prices have shown resilience in the face of China ending its gold purchase plan and uncertainty about the Fed's prospects. "Looking ahead, gold may see some marginal CTA selling below $2,325/oz., but there is still a clear safety margin before the next large CTA selling triggers near $2,202/oz."

Fxstreet analyst Marios Pashardes also discusses the current situation of gold in his article, with the following opinion:

Gold has risen 12% so far this year and is facing a consolidation. Recently, gold has been in a wide range of consolidation since encountering strong resistance at $2,400 in April and May. This form suggests that a double top may appear on the weekly chart, and if prices fall below the key support level of $2,275, it will confirm a put position.

Last Friday, gold fell sharply by 3.5% under the action of two important catalysts, becoming one of the largest trading days to fall in recent months. The People's Bank of China announced that it would not increase gold reserves in May, ending 18 consecutive months of gold purchases. This unexpected suspension of purchases caused the price of gold to initially drop, but it is still unclear whether this is a temporary suspension or a long-term strategic change. In addition, due to the reduced expectations of the Fed's interest rate cut in September, the price of gold is further under pressure. Strong U.S. non-farm employment data has fueled speculation that the Fed will maintain higher interest rates for a long time, which has had a negative impact on gold demand.

The current market sentiment for gold is weak and needs new catalysts to restore buyer confidence. The top priority is to pay attention to the upcoming CPI data and FOMC meeting.

In 2024, gold showed a clear trend before and after the FOMC meeting:

At the January meeting, the Federal Reserve maintained a stable interest rate, and the price of gold fell the following week due to the Federal Reserve's cautious stance on inflation.

However, due to the Federal Reserve's decision to maintain interest rates unchanged, coupled with dovish signals and continued economic uncertainty, the attractiveness of gold as a hedge asset has increased. The price of gold rose after the March (March 19-20) and April (April 30-May 1) meetings. Two days after the April meeting, the main support level of $2,275 was formed, and the market rebounded to a historical high of more than $2,440.

Although it is expected that this FOMC meeting will not change the policy, the press conference and the 'Summary of Economic Projections' will reveal the Fed's current views and expectations for interest rates before the end of the year.

The key support level for gold is $2,275. As long as gold stays above $2,275, the long-term uptrend will not change, indicating that the current sideways trend may be a continuation pattern, allowing the market to adjust to this year's new price level.

Gold is currently testing the lower boundary of the 45-day moving average channel, which is an important trend indicator. Maintaining above $2,275 will keep the overall trend upward, and any bullish signal may rekindle the uptrend.

Last Friday's pullback pulled the market down to $2,285, just $10 higher than the key support level of $2,275 established in early May. If the key support level of $2,275 is broken, the bearish trend will be confirmed on the weekly chart, and the trend on the daily chart will turn to bearish. This may cause a sharp correction, and the next key support level is near $2,150, where the 200-day moving average and the 45-week moving average intersect. This area also coincides with the high point in December 2023, indicating that if the market sentiment changes, this will be a strong support level.

If the Fed maintains its current policies, adopts a data-driven approach, and maintains neutrality without changing its tone, gold may continue to trade in a large consolidation pattern. However, the Fed's hawkish stance or signs of opposition to rate cuts in 2024 may put pressure on gold, causing the price of gold to fall below the $2,275 support level and triggering a long-term correction.

Gold bulls hope for weak CPI data and a dovish Fed, which may be a bullish catalyst, triggering a rebound in gold from last week's decline and pushing gold to break through the short-term resistance level of $2,325, thus appearing stronger in the recent range.

Editor / ruby

The translation is provided by third-party software.

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