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Summary: After a strong rebound to around $1,930 in the pre-New York session, gold prices retreated. Despite weekly initial jobless claims slightly exceeding expectations for the week ending June 16, gold continues to face selling pressure. The U.S. Department of Labor reported 264,000 initial jobless claims, while the market expected 260,000.

Fundamentals

Gold prices fluctuated sharply around $1,922-$1,930 before the New York session. Investors were perplexed while evaluating hawkish testimony from Fed Chair Powell and dovish comments from Atlanta Fed President Bostic, leading to a lack of direction in gold prices.

Meanwhile, the market received the latest secondary data, indicating that initial jobless claims in the U.S. reached 264,000 for the week ending June 16, the highest since the week of October 30, 2021. California, New Jersey, and Connecticut had the highest number of applicants, while Georgia, Missouri, and Indiana saw a decrease in claims.

This may indicate a cooling labor market, with recent announcements of layoffs in the technology and banking sectors and signs of a slowdown in demand for temporary workers.

The trend of increasing jobless claims continues, and the shift from the lowest point of the cycle certainly paints a concerning picture. However, this cycle is unique in many aspects, and analysis based on previous cycles may not be entirely accurate. In fact, based on the changes in jobless claims so far, the unemployment rate should have been much higher.  

Overall, jobless claims came in higher than expected for the fourth consecutive time. The higher number of jobless claims indicates that labor market conditions are seriously losing their appeal. Easing labor market conditions in the U.S. could increase the likelihood of another Fed rate hike before the end of the year. All of these are bearish for gold.

Technical Analysis

Gold bears have been defending a descending triangle pattern in the two-hour chart. The Relative Strength Index (RSI) is diverging downward within the bearish range of 20-40, indicating that the downside momentum has been triggered.

Sentiment remains poor in the four-hour chart. The RSI hovers near the oversold level of 30, fueling speculation of a potential upward reversal, but the declining stochastic oscillator and the falling MACD are reducing the likelihood of a significant rebound as the price deviates from its simple moving average (SMA).

If gold triggers below the trend line and extends below the $1,918 low, the decline may initially stall near the $1,909 level before accelerating towards the range of $1,887-$1,860, where the downtrend line from March to April coincides. Thus, a further decline could lead to a test of the $1,860 range.

However, in a positive scenario, if the price regains its footing around $1,934, the bulls are expected to retest the $1,938-$1,947 range. An upside strength above $1,950 would significantly ease the downtrend.

Overall, gold prices have been under downward pressure in recent sessions since falling below $1,932. Continued close below the previous day's closing price may lead to further bearish continuation. In terms of strategy, prioritizing going short at highs aligns with downward impulse waves.

Trading Recommendations

Trading Direction: Short

Entry Price: 1927

Target Price: 1860

Stop Loss: 1964

Valid Until: 2023-07-06 23:55:00

Support: 1909, 1890, 1886

Resistance: 1927, 1934, 1938