Correction Brings Gold to Key Support as Market Awaits US Inflation Data

Recent Performance: After having reached an all-time high last Monday, gold prices declined by more than 4%, now hovering around $2,350. Despite this decline, the daily trend remains strongly bullish, although a double top formation at $2,435 indicates a strong rejection of this area. The current bearish momentum is seen as a corrective wave within the ongoing uptrend.

Market Drivers: The selloff was primarily driven by hawkish Federal Reserve minutes and stronger-than-expected U.S. PMI data. The data showed that business activity in the services sector accelerated to its strongest pace in over two years in May, suggesting the economy can tolerate higher interest rates for longer. Persistent inflationary pressures reduce the likelihood of Federal Reserve easing, keeping the U.S. dollar strong and preventing gold from attempting new highs.

Support Levels: Gold is testing a critical support level at $2,325 marked by the 45-day EMA channel, with the next significant support outlined at the May low of $2,280, marking the last confirmed bottom formation on the daily timeframe.

Resistance Levels: The market is contained by the short-term resistance area between yesterday’s high of $2,358 and the upper boundary of the 200-hour moving average channel at $2,370. A break above $2,370 is needed to realign momentum with the daily trend and target the continuation of the bullish movement.

Key Pivot Level: The focus is firmly on the $2,325 support level, where a bullish reversal following a possible retest of the area could signal renewed upward momentum and allow bullish traders an opportunity to consider long positions. However, with current momentum pointing downwards, a clear breakout below the support would signal a continuation of bearish pressure, potentially leading the market towards the previous daily bottom at $2,275 and testing the overall uptrend’s resolve.

Upcoming Economic Data: Although the daily chart remains bullish, a consolidation period could follow as the market awaits catalysts such as the U.S. GDP second estimate on Thursday and the PCE Price Index on Friday, ahead of the Federal Reserve meeting on June 12th. These events are likely to bring volatility to the market and cause a retest of the key levels.

Gold 1H Chart

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