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Fundamentals

During Thursday's (May 11th) Asian session, spot gold oscillated upward narrowly and it is currently trading near 1926. Last night's release of U.S. inflation data was weaker than market expectations, and the market cooled down the expectation of June rate hikes. Thus, the USDX weakened, once fell to 101.2, and gold prices once surged to 2048. However, the logic of inflation could not maintain the appreciation of gold prices, and then gold prices retracted all gains, once declined down to 2021. Because the market realized that the U.S. inflation is still at a higher level, far away from the policy target of 2%, the market is more concerned about how long the high policy rates will last. Only the development of rate cuts expectation will strengthen the appreciation of the gold prices, which may need a longer time.

In general, U.S. employment data for April is better than expected, which indicates that the U.S. economy still has some resilience, while the speculation of recession expectations will be moderated, which is unfavorable to the gold price. But on Wednesday, both Parties failed to reach an agreement regarding the debt ceiling. Consequently, the earliest debt default may emerge at the beginning of June if the debt ceiling could not be increased, and the concerns about the U.S. debt crisis provide safe-haven support to gold. However, although the U.S. inflation fell, it is still high, and the Fed will not cut interest rates soon until the end of this year. For gold prices, the expected period of strengthening has not been reached, given that overnight gold prices dropped back from highs, the bulls are discouraged, and gold descended with oscillations. Nonetheless, the space below is also limited.

Today's trading reference range is 2015-2035.  

Technical Analysis

Referring to the daily chart, gold prices pulled up strongly in early May and broke the previous high, but MACD formed a bearish divergence, and the lack of momentum to follow up after the high, making gold lack momentum to the upside. Currently, a double-top pattern emerges, and gold prices rebound mildly, or just oscillated at highs. These movements could not effectively break the dumpling tops pattern, gold prices may build a top under oscillations, and the current initial support is still near the 20-day SMA (2008) Furthermore, if the support is lost, the short-term bearish signal will be strengthened. Further support will be near 2000, while the support for last Friday's low is also near. If the support is lost, gold prices are expected to plunge further to around 1969.

Anyway, gold has little chance to plunge before the support is broken technically, and gold has the fundamentals to jump higher again. Try to focus on the resistance near 2050 above.  

Trading Recommendations

Trading direction: short

Entry price: 2035

Target price:2015

Stop loss: 2055

Support: 2008.000/1969.000

Resistance: 2048.000/2080.000