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Fundamentals

During the Asian session on Friday (June 14), spot gold went upside in a narrow range and is currently trading around 1962. Overnight US initial jobless claims exceeded expectations again, leading to a breakthrough below the 100 integer mark. In addition, this is also the lowest level of gold prices since April last year, achieving six consecutive declines and gaining support from hovering at a one-month high. In the general direction, the market expects that the Fed will soon end the interest rate hike cycle. With market expectations that the Fed will no longer take further tight policies, perhaps the dollar index will fall into lower territory. However, as the recent decline slope is too steep and lasts too long, gold prices will have a demand to rebound and adjust.

Data: The US PPI YoY growth decelerated to 0.1% in June from 1.1% in the previous month, lower than the expected 0.4% and hitting a new low in nearly three years. While US PPI rose 0.1% MoM, it was still below expectations of 0.2%. Core PPI rose 2.4% YoY, which is also below expectations of 2.6%. It can be seen that the cooling PPI is eventually transmitted to the commodity items in the CPI. In a continuously tightening interest rate environment, the Fed's anti-inflation task has finally made substantial progress. The moderation of aggregate demand is bringing it closer to its inflation target. In addition, initial jobless claims for the week were 237,000, lower than the expected 250,000 and the previous value of 248,000. From the data perspective, the US is currently at the intersection of "cooling inflation and strong economic resilience". Although the US has confirmed that the rates increasing cycle is coming to an end, great uncertainties still remain in the timing of the rate cut. The stickiness of the core CPI is likely to persist, especially after the disappearance of the high base effect.

Data for investors to watch today include the Eurozone's quarterly-adjusted trade balance for May, the US June monthly and annualized import price index, and the US preliminary University of Michigan consumer confidence index for July.

Technical Analysis

Trading at the daily timeframe, the overall state of XAUUSD is relatively stable, with the price testing the resistance above around MA60 at 1963. Although the price below has retraced to around 1952 in the evening, the subsequent rapid rebound allowed it to continue to oscillate around 1960. Despite gold prices have seen a wave of retreat during the day, the US dollar is too weak for the temporary bears of gold to provide an effective decline. As a result, gold closed around 1960, with the daily chart finally closing a small white body. After the climb to around 1960, gold has maintained a two-day high consolidation with no clear direction visible, suspecting that this round of rally may be totally attributed to the weakening dollar. However, in the last two days, the dollar has fallen while gold has not risen, and the dollar index has come out of 6 consecutive declines with a steep slope. Therefore, in addition to the weakening of the dollar, moderate inflation is also one of the reasons for this decline. Meanwhile, economic data remained stable without significant changes. However, as the core CPI remains sticky, the dollar may oversell in the short term. The extension of the dollar's decline will limit the correction of gold prices to a smaller range. At the same time, suppressed by the MA60 above, gold prices can only remain strongly volatile. Furthermore, if the dollar index continues to fall, gold prices will break through the resistance of the 1970 line or even the 1980 line. It is worth noticing that once the oversold US index stops falling and rebounds, gold will be likely to suffer the risk of suppression.

In view of the strong expectations during the day and the limited short-term upside, it is recommended that investors still focus on buying low and selling high in the range. Aggressive traders can try to go short at 1963, with stop losses set above 1970. The first target is 1946, where can set positions to break even and stop loss. And investors can take profit totally on the second target at 1940.

Trading Recommendations

Trading Direction: Short

Entry Price: 1963

Target Price: 1946

Stop Loss: 1970

Support: 1950.000/1938.000

Resistance: 1963.000/1970.000