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Fundamentals

During Tuesday's (May 9th) Asian session, spot gold narrow oscillated and is currently trading at 1924 with oscillations. Fewer data was released yesterday, and the impact on the USD and the gold trend is small. Besides, there will be essential data about US inflation tomorrow evening, and the bulls will be more cautious, gold maintains a narrow oscillation pattern. It is expected that the narrow oscillation will be maintained until the data release. However, the market expected the inflationary pressure to be eased, which slightly supported gold prices.

FactSet data indicated that the core CPI is expected to rise 0.3% this month, compared with 0.4% in March. Meanwhile, CPI is expected to rise 5.0% YoY in April, unchanged from March. Core CPI will rise 5.4% YoY, compared to 5.6% in March.

Bank lending is expected to decline as economic growth is expected to decelerate sharply in the coming months due to a combination of Fed rate hikes and the regional banking crisis. Slowing economic growth may also result in recession, or will further reduce inflationary pressures, with inflation expected to return to under 4% at the end of the year. Furthermore, the decline of recession and inflation will significantly support the Fed to cut interest rates at the end of the year, which is favorable for gold.

In general, the Fed's financial stability report points out that continued stress in the banking system could cause a significant economic downturn. Moreover, the Fed survey found that lending standards tightened in the first quarter, weakening real demand and recession signals gradually emerged. At the same time, with the end of the earnings season, the market will turn its attention to the growing banking crisis and other hot issues. As the U.S. government did not timely reverse the underlying logic of the banking dilemma, the banking sector problems are rapidly deteriorating and may spill over into the financial sector called "regional banks", causing a strong crunch effect and credit risk in the market, while the risk is rapidly climbing day by day. For gold, there are more certainties to support it for appreciation, so going long at lows is recommended.

The trading range today will be 2020-2035.

Technical Analysis

Daily chart: MACD's golden cross was broken, suggesting a bearish divergence signal. Moreover, KDJ formed a death cross, while gold formed a 'long-upper-lower candle' pattern at the historical highs. Furthermore, a double-tops pattern emerged in the daily chart, and gold may retrace with oscillations shortly. The initial support is near the 20-day SMA (2008) and the lower support on last Friday was near 2000. If the support is lost, short-term descending risks will be added. Further support will be near 1978, which was the low of last Tuesday, while the lower support on April 19th was near 1969. If gold plummets below further, bearish signals will be increased in the middle term, and the strong support below will be close to 1924.  

As gold is supported by the 20-day SMA, with buying-the-dips near 2000, there are still chances for bulls. The initial resistance above will be near the 5-day SMA (2030) and stronger resistance near 2048. If the position is recovered, further bullish signals will be strengthened, and gold may surge above the previous high (2080).  

Trading Recommendations

Trading direction: Long

Entry price: 2020

Target price: 2048

Stop loss: 1990

Support: 2008.000/1969.000

Resistance: 2035.000/2048.000