Gold is in bearish trend

Gold prices are extended a sell on its fourth day, two-sided trading session. The significantly bearish near-term technical postures for both metals are inviting the speculators to play the short sides of the futures markets at present. Gold hit a six-week low today. Gold were last down $6.80 at $1,805. Gold prices are close to key chart support levels at $1,800 and $1,790 that if breached would likely set off heavy sell stop orders in the futures market.

It makes sense in the context of quantitative tightening and rising interest rates, as such moves offer dollar holders a payout which gold does not provide.

The U.S. data point of the day was the personal income and outlays report for May, including the personal consumption expenditures price index component of the report that is said to be the Federal Reserve’s favorite inflation gauge. The May CPE price index came in up 6.3%, year-on-year, with the core rate up 4.7% in the same period. In the April report, the PCE price index was also reported up 6.3%, year-on-year. Metals market bulls were briefly assuaged by the stable readings in the report, as many reckoned the numbers could have been worse, possibly prompting the Federal Reserve to be even more aggressive in its monetary policy tightening. Raw commodity traders, including metals traders, have taken a tack recently of being more worried about less consumer and commercial demand for commodities amid an economic recession—as opposed to the notions of higher inflation being supportive for raw commodity prices.

Technically, August gold prices hit a six-week low early on today. Bears have the firm overall near-term technical advantage and have gained power this week. Prices are starting to trend down on the daily bar chart. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at the May low of $1,792. First resistance is seen at today’s high of $1,826 and then at Wednesday’s high of $1,830. First support is seen at $1,800 and then at $1,790.

Analyzed by: Mr. Chhea Chhayheng Business Manager of PP Link Securities

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