On June 29th, following last Friday's analysis, it was noted that while the US PCE data showed inflation did not exceed expectations, providing a temporary pause in gold's decline, the Federal Reserve's hawkish pivot and the market's significantly increased expectations for a rate hike this year continued to exert key downward pressure on gold. Consequently, the suggested strategy was to watch for support around $4,000, followed by $3,959 and $3,900, with resistance anticipated near $4,044, then $4,070 and $4,100.
Looking at the subsequent price action, after opening in the Asian session last Friday, gold encountered resistance upon rebounding to $4,029, subsequently breaking below the key $4,000 level to find support at $3,983. The price then fluctuated higher, with the uptrend extending after the European session opened. Following the US market open, gold continued its rebound, reaching a daily high of $4,096 before encountering resistance and pulling back, currently trading around $4,069. Overall, gold halted its decline and recovered last week, but the strength of the rebound was relatively limited. The price encountered resistance near the $4,100 pressure level identified, failing to alter the overall bearish pressure.
Core Market Drivers
Analysis indicates that the Federal Reserve's hawkish pivot and the market's substantially heightened expectations for interest rate hikes remain the core factors currently suppressing the gold price. While the Fed held rates steady, it raised its median interest rate forecast for this year from 3.4% to 3.8%, signaling officials' expectation for one more rate hike in 2023. The dot plot revealed that among 18 policymakers, six projected two more hikes, while nine supported at least one more. This hawkish monetary policy shift has propelled a sustained rally in the US dollar, diminishing gold's appeal and directly pressuring its price. Gold's halt in decline and rebound last Friday was primarily due to the US PCE data showing inflation did not overshoot, easing some inflation concerns and causing a short-term pullback in the dollar. However, the limited nature of gold's rebound indicates the overall trend remains under pressure.
Technical Perspective
On the daily chart, gold found a footing and stabilized last Friday, but the limited rebound momentum means it has not escaped overall downside risks. Support levels to watch include the 4-hour Bollinger Band middle line around $4,030, followed by the $4,000 psychological level. Resistance is seen at the $4,100 level, where last Friday's rally stalled and which coincides with the current 4-hour Bollinger Band upper line, followed by the daily 10-day moving average near $4,140. The 5-day moving average maintains a bearish crossover downwards, while the MACD and the bearish crossovers on the KDJ and RSI indicators are slowing, though they remain in weak territory. Short-term technical signals continue to favor the bears, suggesting a risk of further declines for gold.
Intraday Outlook and Strategy
Despite the US PCE data tempering inflation fears and leading to a pullback from highs in the dollar, gold's rebound has been limited as expectations for Fed rate hikes continue to cap its price. The suggested approach is to treat the market with a range-trading mindset. Support can be monitored around $4,030 and $4,000, while resistance is anticipated near $4,100 and $4,140.