Gold remains anchored to a significant trendline, with the market mostly moving sideways. Recent Core CPI and Core PPI data came in lower than expected, but this didn’t boost prices, indicating that traders may be focusing on other factors. Overall, gold’s upward trend is expected to continue, supported by falling real yields as the Federal Reserve eases monetary policy. However, any hawkish shifts in expectations for rate cuts could lead to short-term price corrections.

Daily Chart Analysis

The daily chart shows gold retracing to the upward trendline, where buyers could step in to push prices toward the resistance at 3438. On the other hand, sellers will aim to break down to the 3120 level. In the 4-hour chart, a minor trendline connects recent swing lows. Buyers might look for a bounce off this trendline, while sellers may try to push prices below it to set new lows. The 1-hour chart offers little new information; buyers are eyeing opportunities on dips at the trendlines, while sellers are considering potential breakouts. Important economic data is on the way, including US Jobless Claims and Retail Sales figures today. The University of Michigan Consumer Sentiment survey will be released tomorrow to wrap up the week.

Derivative Trading Strategies

We think this rangebound market presents a buildup of tension before a big move. The weak inflation data, with the latest Core CPI at 3.4%, signals that traders may be shifting their focus to future economic growth. This shift could lead to increased volatility as new data is assessed. Our long-term positive outlook for gold is tied to the expectation of declining real yields once the Federal Reserve starts easing. Historically, gold has thrived in the lead-up to rate cuts, like during the cycle that began in mid-2019. However, any comments from officials delaying cuts could trigger short-term price corrections. Recent economic data shows that May’s retail sales rose only 0.1%, which adds to concerns about an economic slowdown. Typically, this would support gold, but its position on the main trendline indicates trader uncertainty. We see this as a crucial decision point for gold in the weeks ahead. For traders anticipating a rally, buying call options could be a good approach, especially when prices test the trendline. This strategy allows traders to participate in potential upward movement toward the resistance level discussed earlier. The entry point is clear, basing the bullish position on the trendline. Conversely, traders expecting a downturn should consider purchasing put options if prices fall decisively below the main trendline. A confirmed break of the minor trendline on the 4-hour chart would signal increased bearish conviction, targeting the next major support level noted in the report. Monitoring implied volatility in gold options could reveal important insights; a spike might indicate that the market is expecting a more significant move. Tomorrow’s University of Michigan Consumer Sentiment survey will be crucial, particularly its inflation expectations, which the Fed closely monitors. A surprise in this survey could be the trigger that finally breaks the current stalemate. Create your live VT Markets account and start trading now.

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