On Monday (May 6), the price of gold climbed more than 1% to $2,324.94 an ounce. Earlier, US employment data fell short of expectations, boosting expectations that the Federal Reserve might cut interest rates later this year. The US dollar index continued to weaken, helping to stabilize the retracement trend of gold. Meanwhile, the escalation of the Middle East conflict situation has revived the morale of the gold bulls.

Source: Yi Huitong

According to data released on Friday, employment growth in the US slowed more than expected in April, and the year-on-year wage increase fell below 4.0% for the first time in nearly three years. This has put a lot of pressure on the US dollar. The US dollar index has been declining for several consecutive trading days, causing the dollar to hover near its lowest level in about a month. After the US non-agricultural data was released, the CME (CME) FedWatch federal observation tool showed that the market expected the possibility of cutting interest rates in September to increase to 66%. The famous investment bank Goldman Sachs wrote in a report: “We still expect to cut interest rates twice this year, in July and November, respectively.” There are various signs that the economy is expected to achieve a soft landing as the Federal Reserve fights against inflation. It has allayed concerns that the market is about to fall into the painful predicament of high inflation and slow growth. Next, as long as the US economic data performance is not that strong, and other Federal Reserve officials do not refute Powell's opinion of not raising interest rates at last Wednesday's interest rate meeting, there will be room for further decline in the US dollar index. And I'm afraid gold's optimism will be revived. Furthermore, the Israeli military has begun evacuating civilians from Rafah. The cease-fire negotiations between Hamas and Israel in Cairo over the weekend seem to have stalled, and hopes for a cease-fire in Gaza have faded. Continued tension in the Middle East also appears to have boosted the morale of gold bulls.

On a technical level, on the daily level chart, gold was under pressure from the short-term moving average fluctuating slowly, maintaining a weak correction trend pattern; however, this Monday saw a wave of bottoming out and continuing to rise. Currently, it has broken through the compression of the 10-day EMA of $2,317, and the closing price is also close to the mid-trajectory level of $2,335 near the Bollinger Band channel. The technical indicator RSI began to shift, indicating that the bearing capacity of low-level gold was not small. In the near future, we must pay close attention to whether the long and short watershed level of $2,335 can be broken through and above this resistance level. Gold is expected to resume its upward trend. Conversely, if blocked, I'm afraid gold will still face pressure to adjust.

Bank of China Guangdong Branch Wang Gang

This is a personal opinion only and does not represent the views of your organization