Gold remains pressured as traders continue to price the risk of the Fed having to resume rate hikes by the end of this year, providing a powerful headwind for non-yielding assets.
Correlation analysis below shows a perfect five-day inverse relationship between gold and one-year Fed pricing (-1.00), as measured by the shape of the futures curve between June this year and next. It's a similar story with US two-year yields (-0.97), reinforcing the view that gold is currently trading as a front-end US rates proxy, with higher yields and a stronger dollar keeping sellers in control. Unless those dynamics shift dramatically near-term, the fundamental backdrop favours selling into strength.
On the H4 timeframe in the chart below, the oscillators indicate building downside pressure. RSI (14) continues to set lower highs beneath 50 while not yet being oversold, while MACD remains negative, having previously crossed below the signal line. Although it's converging on the signal line again, it has yet to cross back above, keeping the bearish bias in place.
It means short setups are preferred over longs near-term, but the message is not uniformly bearish. Patience remains important, allowing the trade to come to you rather than forcing the issue.
If the price were to push back towards $4,352 resistance, coinciding with the swing low set in late March, shorts could be set with a tight stop above for protection, targeting $4,270, the lows struck on Monday. A backtest and rejection from $4,352 would strengthen the merits of the setup. If the first target were to be achieved, $4,260 was a former breakout level back in late 2025 that may still warrant attention. Beyond that, there's little in the way of visible support until $4,100 where the price bottomed in March.
However, when considering the setup, make sure you size up risk-reward appropriately given what we've seen in Asia. Risk appetite has rebounded strongly and may well carry through to Europe, something that would normally point to upside risks for gold given the relationship we've seen with risk appetite lately.
And while Friday's payrolls plunge saw the price close beneath the 200-day moving average for the first time since October 2023, with two-thirds of a Morning Star bullish pattern now in place on the daily timeframe, a close back above $4,400 would raise questions over whether the break will stick.
As such, if the price were to recover and hold above $4,352, you could also make the case for a countertrend long looking for a retest of the 200-day moving average. Positions could be set above the level with a tight stop underneath to protect against a reversal.
US inflation test ahead One final consideration is Wednesday's US CPI report for May. Core CPI is expected to halve from April's 0.4% monthly pace, but another print in that vicinity could see traders add further tightening back into the curve, reinforcing the preference for short setups. Equally, a softer outcome would challenge the bearish narrative.
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