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Fundamentals

During Tuesday's (May 23rd) Asian session, spot gold shocked downward, and it is currently trading at $1956, a new low this week and dropping straight to the previous low at $1951. The market's fears of a U.S. debt default have cooled, temporarily suppressing the safe-haven demand for gold after the 'successful' conference between Biden and McCarthy held one week ago. In addition, several Fed officials gave a hawkish speech, pushing up the expectations of the Fed rate hike in June and suppressing the safe-haven gold. Currently, the risk-aversion sentiment fades, and gold prices face further downside risk in the short term, so, try to focus on the support at $1950. But before reaching an agreement in the U.S. debt ceiling negotiations, the market still has a certain wait-and-see sentiment, which limits the downward space of gold prices.

Today, please focus on the May PMI data in Europe and the U.S., the updated situation about the talking from Dallas Fed president Logan, as well as the market expectation of the Fed meeting minutes to be released this Wednesday.  

In general, the two Parties of the U.S. still failed to reach an agreement on the debt ceiling on Monday, leaving only 1 week for negotiations. Besides, the more it procrastinates, the more the market's risk aversion will aggravate, even if the negotiations will be successful in the end, the market will not wait till the last minute as it is unrealistic. For gold prices, the support will be stronger later, and traders can try to catch a chance at highs. But at the same time, U.S. House Speaker McCarthy explained on Monday that the U.S. people don't need to react too early, which contrasts with his previous cautions on this topic. It comforts the market sentiment, sending gold prices under pressure. In addition, it should be alert that the debt ceiling is probably an appetizer, as the Fed minutes and heavy economic data are coming later, which concerns the trend of gold for a period. In the short term, gold prices are still shock oriented.

Today's trading range will be $1950-$1990.

Technical Analysis

Daily chart: Gold has plummeted below the significant support at $1969, where the 5-day and 60-day SMAs locate, exhibiting clear weakness. Meanwhile, the 5-day SMA crosses below the 60-day SMA, while the 10-day SMA crosses below the 20-day SMA and forms an expanding death cross. Furthermore, MACD forms a death cross and passes through the 0-axis, trapping gold in a weak pattern shortly. The initial support will be near $1950, where the low on April 3rd and the low of the past two months are close. If this position is lost, the strong support below will be 61.8% Fibonacci retracement ($1910) of the appreciation from $1805-$2080, and $1900. If the support is lost, the reversal of gold will be confirmed, and it may just slightly rebound with a descending trend.

Moreover, the initial resistance is near the 5-day SMA ($1969) or the 60-day SMA ($1966), then, further resistance will be near the 10-day SMA ($1990) and stronger resistance will be near $2001 or $2000. If gold aggressively recovers the resistance, it will keep a bullish trend later.  

Trading Recommendations

Trading direction: Long

Entry price: 1941

Target price: 1980

Stop loss: 1910

Support: 1950.000/1910.000

Resistance: 2000.000/2030.000