Bottom line: Gold might have carved a meaningful top around $1765 levels and could be close to producing a sharp bearish reversal. It is early to confirm at this point, but a break below $1660/61 would add further confidence.

Fundamental Outlook:

Gold prices continue to consolidate after hitting $1765 levels over the last week. The FOMC is expected to continue its Dovish Tone in the upcoming monetary policy meeting on June 10, and it remains to be seen how Gold prices react to the low interest rate regime by the Fed.

WTI Crude prices continued its rising streak and closed above $34.00 mark yesterday. On the other side Brent Crude prices also rallied and closed around $36.00. The production cut announced last month by the OPEC+ members and rising demand over the re-opening of economies remain major factors for the rise in Oil prices.

DAX including most other markets rallied yesterday as if the escalating tensions between US-China has already been priced in last week. DAX futures managed to rally close to +2.5%, closing around 11400 mark. We expect risk-sentiment to continue its trend over the week as SPX500 and Dow Jones futures also hit 3000 and 25000 levels. The opening of economies post COVID-19 lock down, hopes of potential drug/vaccine development are some factors driving equities higher.

Technical Analysis:

Gold bulls might be losing control as the yellow metal remains vulnerable to further drop towards $1660 levels, going forward. It is trading around $1732 levels as we write this article and expected to slip below $1725 interim lows. The short term targets could be seen towards $1690-1700 levels as bears are looking to break below $1660.

Alternately, a break above $1765 resistance could push towards $1773 levels before the metal faces resistance again. It might be considered good to avoid initiating long positions as probabilities for further upside remains limited.

Aggressive traders might be willing to remain short from $1730/40 levels, with protective stops above $1750 and projected targets below $1660 in the short term.

Prepared by

Harsh Japee, Technical Analyst.

Gold Chart

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