Baxia Markets
June 11, 2024

Gold Prices Face Pressure Amid Firm US Dollar and Reduced PBoC Buying

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Gold prices (XAU/USD) encountered fresh supply during early European trading on Tuesday, partially retracing from the previous day's modest recovery gains. This pullback follows a decline from the $2,287 area, reflecting market reaction to upbeat US jobs data. Investors, recalibrating their expectations for a near-term interest rate cut by the Federal Reserve (Fed), have contributed to elevated US Treasury bond yields, bolstering the US Dollar (USD) to a multi-week high. Consequently, demand for the precious metal has waned.

Moreover, the People's Bank of China (PBoC) notably curtailed its buying activities in May, marking an end to its prolonged purchasing spree and diverting flows away from gold. However, amidst this backdrop, political uncertainty in Europe and geopolitical risks serve to mitigate further losses. Traders are likely to await the release of the latest US consumer inflation figures and the FOMC decision on Wednesday for insights into the Fed's rate-cutting intentions, shaping the near-term trajectory for gold prices.image-png-Jun-11-2024-12-03-35-5893-PM

Friday's market turmoil saw a dramatic drop of over 1000 pips following robust US NFP data, despite a higher unemployment rate. The formation of a death cross between the Exponential Moving Averages (EMA) 50 and 200 confirmed bearish sentiment on Friday. Additionally, the positioning of Tenkan Sen and Kijun Sen below the Ichimoku cloud underscores bearish dominance. Despite trading sideways during the Asian session, market movements within yesterday's range indicate consolidation.

Key resistance levels are identified at the EMA 200 and the Ichimoku cloud, with a breakthrough signaling a bullish reversal. Conversely, crucial support lies at yesterday's swing low of $2286. Although the Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) show signs of ascent, their overall bearish stance suggests caution. If key support levels are breached, a further downward trajectory is likely.

In summary, gold prices face headwinds from a firm USD and reduced PBoC buying, with market sentiment awaiting key economic data releases and the FOMC decision for directional cues. Despite recent setbacks, geopolitical uncertainties may provide some support amidst a volatile landscape. Traders are advised to monitor key support and resistance levels closely for potential shifts in market dynamics.

Key Economic Releases to Watch Today

GBP, Claimant Count Change

Actual 50.4Kvs Forecast 10.2K vs Previous8.4K    

GBP,  Unemployment Rate 

Actual 4.4% vs Forecast 4.3% vs Previous4.3%

CAD, Building Permits (MoM)

Actual Forecast 4.9% vs Previous-11.7%



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