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Fundamentals

During the Asian session on Tuesday (June 6th), spot gold oscillated in a narrow range and is currently trading around $1959. Overnight, the U.S. data was weaker than market expectations, and weak U.S. economic data cools down the market expectations of the Fed's rate hikes, dragging down the USDX from highs. In addition, there are reports that U.S. regulators are considering raising capital requirements for large banks, causing a tremendous plummet in the DJIA, and stimulating the sentiment of risk aversion. Consequently, it supports gold prices and keeps gold staying near the significant support of $1940, above $1952. Moreover, the short-term fluctuations in interest rate hike expectations will still disturb the trend of precious metals, investors need to focus on the fundamental data changes.

The U.S. ISM Services (PMI) fell to 50.3 in May, below expectations of 51.5 and April's 51.9, while factory orders growth also deteriorated to 0.4% this month, below market forecasts of 0.5% and the previous 0.9%.

Large U.S. banks may have to raise capital by an average of 20% and an enormous number of banks will face stricter provisioning requirements under a draft plan from U.S. regulators, the Wall Street Journal and Bloomberg reported on June 5th.

Due to the absence of essential data and events today, the bulls and bears just act according to historical data.  

Generally, the market currently strengthens the expectation of the Fed to suspend interest rate hikes in June, but the resilience of U.S. inflation determines that interest rates will remain high for a longer period. Besides, the Fed rate hike will stop but a rate cut is still remote, with the difference in the market's expectation may be further revised. Recently, the market's focus may shift to economic data, it is expected that the recent gold and silver prices will maintain an oscillating trend.

The trading range today will be $1950-$1965.

Technical Analysis

Daily chart: gold rebounded sharply after falling under pressure yesterday, indicating a potential oscillation trend and adding the uncertainty of further direction. Nonetheless, the RSI indicator reaches 50.0, while the MACD is forming a golden cross, suggesting a bullish trend soon, which also strengthens the recovery expectation of gold. Today, the resistance above is near $1965, and if gold crosses above it, traders should focus on the pressure near the 20-day SMA ($1974) above. However, traders must shift the attention to $1940 if gold drops below the 5-day SMA ($1955).  

Recommendations: If the retracement reaches the range of $1950-$1955, aggressive traders should go long with small positions in the near term with a stop-loss target at $1945. The target is to cut the positions at $1965 and take profits. Instead, if gold rebounds to $1965 today, aggressive traders can go short with small positions shortly with a stop-loss target at $1974, taking profit with fewer positions at $1955.

Trading Recommendations

Trading direction: Long

Entry price: 1955

Target price: 1988

Stop loss: 1930

Support: 1940.000/1932.000

Resistance: 1965.000/1988.000