A classic key reversal saw gold crash to a fresh six-month low at $4,046 on Thursday before staging a violent rebound that carried it back above $4,240 by the close. The pattern — a textbook “bear trap” — forced short sellers to cover their positions, amplifying the snapback. But the yellow metal still ended the week with a 2.6% loss at $4,239.70 (one quote put the Friday settlement at $4,241.10), and over the past month it has shed nearly 10% of its value.
On the macro front, the recovery faces stiff headwinds. US producer prices surged 6.5% year-on-year in May, while the consumer price index rose 4.2%, both readings that limit the Federal Reserve’s room to cut rates. The European Central Bank added to the tightening bias by raising its benchmark rate 25 basis points to 2.25% on Thursday — the first increase in almost three years. Strong US payroll data, with 172,000 jobs added on June 5, further dims hopes for easy money. Against that backdrop, the Fed’s two-day policy meeting on June 16-17 — the first under new chairman Kevin Warsh — will be the next major catalyst. Traders will scrutinize the dot plot and any guidance on the rate path.
Geopolitical factors have also shifted. Reports of a potential diplomatic breakthrough in the Middle East, including the US canceling planned military strikes against Iran, reduced the safe-haven bid that typically supports gold. On top of that, speculation about large capital outflows toward high-profile tech listings, such as a possible SpaceX IPO, eroded demand for havens. Regulators are adding their own twist: the CFTC is seeking to restrict trading in gold futures, putting the CME Group’s plans for around-the-clock trading on ice for now.
Should investors sell immediately? Or is it worth buying Gold?
Underpinning the market, physical buying remains robust. Central banks continue their accumulation spree — China alone added ten tonnes in May, marking the nineteenth consecutive month of purchases. Institutional players such as Tether are also holding sizable positions. These buyers are taking advantage of the lower prices, providing a floor beneath the sell-off.
Technically, the metal remains in a fragile state. The relative strength index sits at 36 in one measure and 36.2 in another, flashing near-oversold territory. Gold is trading roughly 8% below its 50-day moving average. The $4,200 level has emerged as key support; a break below that could trigger another leg lower. On the upside, resistance is pegged at $4,318 — a close above that mark would confirm Thursday’s key reversal. All eyes now turn to the Fed’s verdict on Wednesday.
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