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11 June 2024 | FXGT.com

Gold’s Bull Run Hangs on $2275 Support with FOMC and CPI In Focus

  • Gold Surges 12% Year-to-Date, Faces Consolidation: Gold has risen 12% since the start of the year. Recently, however, it has been consolidating within a broad range after encountering strong resistance at $2,400 in both April and May. This pattern suggests a potential double top on the weekly chart, which would be confirmed as bearish if the market breaks below the key support level of $2,275.
  • Gold’s Sharp Decline: Last Friday, gold experienced a sharp drop of 3.5%, marking one of its steepest declines in recent months due to two significant catalysts.
  • China Halts Gold Purchases: The People’s Bank of China announced it did not add gold to its reserves in May, ending an 18-month streak of purchases. This unexpected halt led to an initial drop in gold prices, though it remains unclear whether this is a temporary pause or a longer-term strategic shift.
  • Impact of U.S. Economic Data: Gold prices faced further pressure in the afternoon due to reduced expectations for a Federal Reserve rate cut in September. Strong U.S. Nonfarm Payrolls data fuelled speculation that the Fed will maintain higher rates for an extended period, negatively affecting demand for the precious metal.
  • Awaiting Catalysts: Sentiment towards gold is currently weak, and a new catalyst is needed to restore buyer confidence. Immediate focus is on tomorrow’s CPI data and the FOMC meeting. While no policy changes are expected at the FOMC meeting, the press conference and Summary of Economic Projections will reveal the Fed’s current views and expectations for interest rates through the end of the year.
  • Key Support Level at $2275: As long as gold remains above $2,275, the long-term uptrend remains intact, indicating that the current sideways movement could be a continuation pattern, allowing the market to adjust to this year’s new price levels. Gold is currently testing the lower boundary of the 45-day exponential moving average (EMA) channel, an important trend indicator. Remaining above $2,275 keeps the overall trend upward, and any bullish signals could reignite upward momentum.
  • Will $2275 Hold or Signal a Bearish Shift: Last Friday’s correction brought the market down to $2,285, just $10 above the crucial $2,275 support level established in early May. A break below the key support level at $2,275 would confirm a bearish pattern on the weekly timeframe, shifting the trend to bearish on the daily timeframe. This could lead to a significant correction, with the next key support around $2,150, where the 200-day EMA and the 45-week EMA converge. This area also coincides with the December 2023 high, suggesting a strong support level if sentiment changes.
  • Gold Price Trends Around 2024 FOMC Meetings: In 2024, gold prices showed distinct trends around FOMC meetings. After the January meeting, where the Fed held rates steady, gold prices dropped in the following week due to the Fed’s cautious stance on inflation. However, gold prices rose after the March and April-May meetings, as the Fed’s decision to maintain rates, combined with dovish signals and ongoing economic uncertainties, boosted gold’s appeal as a safe-haven asset. Two days after the April-May meeting, the major support level of $2,275 was formed, and the market rallied to an all-time high above $2,440​.
  • Impact of Fed’s Policy on Gold: If the Fed maintains its current policy, adopts a data-driven approach, and remains neutral without any change in tone, gold may continue to trade within its broader sideways pattern. However, a hawkish Fed stance or indications against rate cuts in 2024 could weigh on gold, possibly breaking the $2,275 support and prompting a long-term correction. Gold bulls are hoping for weak CPI data and a dovish Fed, which could serve as a bullish catalyst, sparking a recovery from last week’s losses and pushing gold above short-term resistance at $2,325, leading to a stronger rebound within the recent range.

Gold Daily Chart

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