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Summary: Gold prices retreated from record highs ($2,079) and showed signs of volatile contraction during the Asian and European sessions on Friday, setting at around $2,046. The market atmosphere is particularly tense as investors are awaiting the release of the U.S. April non-farm payrolls report.

Fundamentals

The U.S. Dollar Index did not extend higher after the FOMC meeting, as the Fed may limit further rate hikes amid the deepening U.S. banking crisis, slowing economic growth, and a deceleration in the U.S. labor market.

However, the market will become clearer after the release of the U.S. non-farm payrolls report in April.

The market generally believes that the U.S. labor market will add 179,000 jobs in April, which is lower than the previous general expectation of 236,000 jobs. The better-than-expected data will renew concerns about a recovery in inflationary pressures.

Gold prices are holding and above the $2,000 level as the Fed's dovish turn on the interest rate outlook and increased economic risks have triggered new safe-haven demand. The current easing is seen as support for gold prices after a breakout from recent historical highs, which also marks the opening of a months-long trading range impasse.

The market currently believes that gold prices may extend higher after breaking out to new all-time highs.

"With short-term momentum decisively rolling over after previously showing a bearish divergence, we look for the $2,070-$2,075 highs to remain a formidable barrier."

"Support is seen at $1,969 initially, beneath which would confirm a deeper pullback to $1,950-$1,934, which includes the 55-DMA, which we would look to hold if reached."

"Post the current ranging phase, we believe the market will eventually move to new record highs, supported by lower U.S. Real Yields. Above $2,075 on a weekly closing basis would be seen to mark a significant break higher, opening up a move to our first core upside objective at $2,330."

And we believe that the $2,070 range is expected to create a strong headwind for the bulls, who have already pulled back twice quickly after failing to continue upward in this range. Daily studies are overbought, which may intend to push prices back above strong support at the $2,000 level to keep the bulls intact. Prices may continue to decline later.

Technical Analysis

Gold has been moving higher since November 2022, in an uptrend channel and in a recognized bullish trend. This supports the view that gold prices could retest the all-time high of $2,079 touched on Tuesday and make a significant move toward the upper band of the rising channel, that is, the psychological level of $2,090-$2,100.

However, the bearish divergence in the RSI and the long upper shadow on Thursday suggests that the bears are eager to return. Bullish signals from other indicators also show signs of weakening, with the focus still on whether the market can hold steady above the historical highs. The "triple top" pressure formed near the historical highs indeed brings heavy pressure to the current upward momentum.

On the other hand, the overnight swing low of $2,030 would provide immediate support. If this level is breached, the bears may expose the psychological level of $2,000; while a deeper decline would be in line with our expectations. In terms of trading strategy, it's recommended to go short at highs.

Trading Recommendations

Trading Direction: Short

Entry Price: 2036

Target Price: 1923

Stop Loss: 2080

Valid Until: 2022-05-19 23:55:00

Support: 2030, 2015, 2000, 1978

Resistance: 2048, 2070, 2074, 2080