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Sellers’ Motivation in Gold Increases with the Break of a Key Support Level

Sellers’ Motivation in Gold Increases with the Break of a Key Support Level

Date: Monday, June 3, 2024 

Monday Market Overview: 

In Monday’s Asian trading session, gold prices experienced a decline as the rush towards risk-oriented assets overshadowed the yellow metal, even amidst a weakening dollar. The Dollar Index concluded May with a 1.56% drop, yet this was not enough to prevent gold from sliding towards the critical $2300 support level. This move can be attributed to the increased expectations of interest rate cuts, which typically boost investor appetite for riskier assets at the expense of safe-haven investments like gold. 

Technical Analysis: 

On the daily chart, gold has initiated a new phase of decline after breaking below the key support level of 2325.43. This drop coincides with the breach of the neckline of a head and shoulders pattern, signaling a potential further bearish movement. The price has now reached the immediate support at 2314.94, aligning with its ascending trendline. If sellers manage to dominate this area, the price could continue its descent towards the 100-day moving average, with further supports at 2301.59 and 2286.86 becoming relevant targets. 

Alternative Scenario: 

A reversal to a bullish trend will only be confirmed if buyers successfully overcome the peak at 2364.00. To reach this level, they first need to break through the resistances at 2325.43 and 2340.16. 

Market Overview and Key Levels 

Resistance Levels: 

  • Resistance 3: 2364.00 
  • Resistance 2: 2340.16 
  • Resistance 1: 2325.43 

Current Price (at the time of analysis): 2318.88 

Support Levels: 

  • Support 1: 2314.94 
  • Support 2: 2301.59 
  • Support 3: 2286.86 

Impactful Events: 

Investors this week will closely watch the ISM Manufacturing Survey later today, as well as the Non-Farm Payrolls data on Friday, to gauge the strength of the US labor market. These reports are crucial indicators of economic health and can significantly influence market sentiment. Strong employment data may reduce expectations for aggressive rate cuts, potentially providing support to the dollar and applying further pressure on gold prices. 

Oscillators and Risk Warnings 

  • RSI (Relative Strength Index): Bearish, indicating selling pressure is prevalent. 
  • MACD (Moving Average Convergence Divergence): Mixed, suggesting a lack of clear momentum. 
  • Moving Averages: Mixed signals, reflecting current market uncertainty. 

Conclusion: 

Gold’s recent decline highlights the growing influence of risk-on sentiment driven by interest rate cut expectations. The technical break below the 2325.43 support level and the breach of the head and shoulders neckline suggests further bearish potential. However, key economic data releases this week will be crucial in determining the market’s direction. Traders should monitor these events closely, as they will likely influence gold’s next significant move. 

Maintaining a close watch on the key support and resistance levels, as well as broader economic indicators, is essential for navigating the current volatility in the gold market. 

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