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Gold waits for fresh directional catalyst

Gold prices edged slightly higher this morning, drawing strength from a weaker dollar and subdued treasury yields.

The precious metal is on route for it’s second week of gains, aided by a less than hawkish sounding Federal reserve and ongoing geopolitical risks. However, the slightly improving sentiment and rebound in equity markets could pose some headwinds for the precious metal down the road. Later today, the Fed’s favoured inflation gauge may offer insight into persistence of rising prices. A strong figure may enforce fresh pressure on the Fed to maintain its aggressive approach towards hiking rates – ultimately weighing heavily on zero-yielding gold.

While some action could be expected this afternoon, gold could be waiting for the US jobs report due to be released on Friday, June 3.  A strong report may offer the opportunity for dollar bulls to fight back, resulting in gold prices depreciating. Given how the greenback will also be influenced by speeches from numerous Fed officials, the next few days could be the calm before the gold storm.

Looking at the technical picture, gold prices are trading around the sticky $1855 level. A solid weekly close above this point may encourage an incline towards $1892 and $1900, respectively. Sustained weakness under $1855 is seen opening the doors towards the 200-day SMA at $1839 and $1800, respectively.

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