Gold is declining for the third consecutive day, dropping below $3960 per ounce and reaching a new low since November. Today, the metal lost another 0.8 percent after falling by 2 percent in the previous two sessions. The pressure is coming from two fronts: monetary and technical, both of which reinforce each other.
The first blow was dealt by Cleveland Federal Reserve President Beth Hammack. On Tuesday, she stated that she sees no compelling evidence that the current interest rate level is restraining the economy, and the central bank may need to raise rates to keep inflation on target at 2 percent. This hawkish statement fits into the already familiar chorus of Fed hawks in recent weeks. Williams mentioned that rates are well-suited to returning inflation to target, Goolsbee pointed to a movement in the wrong direction, and Barkin called the figures too high. As another voice joins this camp, the market is increasingly pricing in a rate hike rather than a pause.
An additional argument in favor of the hawks came from fresh labor market data. The number of job openings in May changed little, indicating a sustained strong demand for workers amid a recent acceleration in job growth. A robust economy gives the Fed the space to keep rates high without risking a sharp slowdown, which is why such data works against gold. The metal, which yields no interest, loses appeal each time the economy's resilience is confirmed, thereby justifying high rates.
The second front of pressure is purely technical, and a sinister signal has emerged. A so-called death cross has formed on the gold chart, with the 50-day moving average falling below the 200-day moving average. Some investors interpret this figure as a sign of a long-term downward trend forming. This pattern has strengthened bearish sentiment and increased pressure from sellers, though it also adds an important caveat. However, it should be understood that the death cross is a lagging indicator that may not reflect a short-term rebound if sentiment suddenly improves.
The diplomatic backdrop remains calm and, contrary to usual logic, does not support gold as a safe-haven asset. American negotiators Kushner and Witkoff have had positive talks with regional leaders in Qatar, and technical negotiations with Iran are progressing.
The nearest and most important benchmark will be the U.S. employment data, which will be released at the end of this week. If the report confirms the resilience of the labor market, hawkish expectations will strengthen further, and gold risks continuing its downward path following the technical death cross signal. However, if the data disappoints, the metal may have a chance for a rebound.
As for the current technical picture of gold, buyers need to reclaim the nearest resistance at $4008. This will allow them to aim for $4062, above which it will be quite challenging to break through. The furthest target will be around $4124. In the event of a decline in gold, bears will try to take control of $3954. If they succeed, a breakout of the range will deliver a serious blow to the bulls' positions and push gold down to a low of $3906, with the prospect of reaching $3849.