Gold prices continue to face pressure in the context that investors are turning their attention to a series of important US economic data, especially the PCE inflation index - the preferred inflation measure of the US Federal Reserve (Fed) to look for signals about monetary policy prospects in the near future.
After a relatively quiet trading session earlier, the global financial market entered a vibrant trading day with a series of important economic data released, including personal income and expenditure in April, the PCE price index, durable goods orders and the second estimate of US Q1 GDP.
Analysts forecast that the overall PCE index will increase by 0.5% compared to the previous month and increase by 3.9% compared to the same period last year, while the core PCE is expected to increase by 3.3%. If these figures are as forecast or higher, the Fed will have very little room to consider easing monetary policy in the short term.
Meanwhile, geopolitical tensions in the Middle East continue to be a factor dominating the developments of the gold market.
The Hormuz Strait – the world's vital energy transportation route – remains the focus of attention as new US airstrikes targeting Iran-related targets increase instability in the negotiation process and maintain pressure on the global energy market.
Oil prices recovered after new developments in this region, causing concerns about inflation to return. This creates an unfavorable environment for gold as investors continue to raise expectations about the possibility that interest rates will remain high for a longer time.
Current developments are creating opposite impacts on precious metals. On the one hand, geopolitical risks are driving defense and support demand for gold. On the other hand, the strengthening USD along with inflationary pressure from oil prices are increasing pressure on precious metals because gold does not bring yields.
On the international financial market, most major stock indices simultaneously decreased before the opening of the US. In Europe, France's CAC 40 decreased by 0.4%, the UK's FTSE 100 decreased by 0.9%, while Germany's DAX was almost flat. In Asia, many markets also sank into red when Japan's Nikkei 225 and South Korea's Kospi both decreased by 0.5%.
In external markets, WTI oil prices traded around $90.95/barrel, while Brent oil was at $96.74/barrel. The USD index continued to rise, while the yield on 10-year US Treasury bonds fluctuated around the 4.5% mark.
Technically, the nearest important resistance zone for gold prices is in the range of 4,420 – 4,450 USD/ounce. If successfully surpassing this area, the next target will be 4,460 USD and further, 4,500 USD/ounce.
In the opposite direction, the important support zone is currently at 4,367 USD/ounce. If this threshold is broken, gold prices may fall back to 4,341 USD and deeper to 4,319 USD/ounce.
For silver, the nearest resistance zone is in the range of 74 – 74.97 USD/ounce. If the upward momentum is strengthened, silver prices may head towards the 75.05 USD mark and further to 78 USD/ounce. Meanwhile, the important support zone is at 73 USD/ounce, followed by 72.78 USD and 71.79 USD/ounce.
