The price of gold experienced a setback at the beginning of the week, dropping below $2320 as geopolitical tensions took a backseat. The recent volatility in the market was influenced by conflicting data regarding interest rates and market participants’ preference for US Treasuries. The US dollar index (DXY) faced resistance at 105.63, leading to a pullback in gold prices.
With central bank meetings scheduled in Australia, UK, Norway, and Switzerland, the focus may shift away from US data. The political developments in France and the European Central Bank’s calendar will likely dominate market sentiment. US retail sales data for May is set to be released, but any minor deviation is not expected to have significant market impact. Federal Reserve policymakers are also scheduled to speak, providing further insight into future monetary policy decisions.
Ongoing tensions in the Middle East, particularly with the dissolved war cabinet in Israel, pose a risk to market stability. Escalation in the region could trigger a flight to safe-haven assets, potentially driving gold prices back towards the $2400 level. Market participants are closely monitoring developments in the Middle East, especially with Hezbollah near the Lebanese border.
From a technical standpoint, gold prices are showing signs of a potential uptrend after a bullish engulfing candle formed at a key support level. However, on the daily timeframe, a head and shoulder pattern has been identified, with a neckline at 2320-2325. The price of gold has been range-bound between 2333 and 2300 on the H4 timeframe, indicating a possible breakout in the near future.
The outlook for gold prices remains uncertain as market participants await more clarity on interest rate decisions and geopolitical developments. The technical analysis suggests a potential uptrend, but the broader market sentiment will play a crucial role in determining the direction of gold prices in the coming days. Traders are advised to closely monitor central bank meetings, economic data releases, and geopolitical events for potential trading opportunities in the gold market.