During the Asian trading sessions from Tuesday to Thursday this week, gold recorded three consecutive daily declines. The market price fell from a high of $4580 to a low of $4387, a drop of nearly two hundred dollars, breaching the key $4400 level. The short-term trend is currently dominated by bearish sentiment.
On January 29 and March 2, gold formed two significant highs at $5597 and $5418, respectively. These highs exhibit a clear double-top pattern on the chart, which tends to guide technical traders towards a bearish outlook. Drawing Fibonacci retracement levels from the high and low of the second downward wave shows the latest market price has already broken below the 0.236 support level. Under the influence of the current bearish trend, prices may potentially set a new low for the year.
On the data front, yesterday's release of the US weekly ADP employment figures showed an increase of 35,750 jobs, lower than the previous figure of 40,750. While the data was relatively weak and theoretically negative for the US Dollar Index, the actual market reaction was muted. EURUSD experienced a rise followed by a retreat during yesterday's session and continued its decline in today's Asian session, indicating the Dollar Index was not significantly impacted by the ADP data.
During the upcoming US session today, two key US data points are scheduled for release. The first is the annual and monthly rates for the April Core PCE Price Index, with market expectations at 3.3% and 0.3% respectively, showing little change from prior values. The second is Initial Jobless Claims, with a market forecast of 211,000, slightly above the prior 209,000, but the overall difference is minor. If the final readings align with expectations, the impact on both the US Dollar Index and gold is likely to be limited.
Regarding news developments, the situation surrounding US-Iran negotiations has taken a sudden turn. While the market initially anticipated a swift agreement, reports emerged yesterday indicating the US conducted another strike against Iran. Iran has stated it will adhere to its red lines in negotiations with the US. Furthermore, former President Trump warned ally Oman that failure to comply could lead to military action, hinting at opposition to any joint management of the Strait of Hormuz with Iran.
The news flow is substantial but overall points towards challenges for the reopening of the Strait of Hormuz. Although US crude oil experienced a notable decline yesterday, market sentiment still leans towards the belief that oil supply cannot recover quickly. Risks of future high inflation in the US continue to rise, potentially forcing the Federal Reserve to adopt a tighter monetary policy. This is a significant factor contributing to the decline in EURUSD alongside gold.
Federal Reserve Vice Chair Jefferson commented yesterday that risks to the inflation outlook are tilted to the upside. He expects inflation to moderate later this year as the effects of tariffs and energy shocks fade. While the labor market remains stable, risks are skewed to the downside. Although Jefferson's remarks were measured, his repeated mentions of elevated international oil prices due to Middle East tensions and high inflation risks had an effect skewed towards supporting the US Dollar, which is negative for both the Euro and gold.