In mid-April, concerns over escalated geopolitical tensions between Iran and Israel triggered a demand for safe-haven assets, leading to a rise in gold prices. However, later statements from both sides indicated efforts to avoid further escalation. It appears that the tense situation has eased, with financial markets showing signs of increased risk appetite. Nevertheless, the allure of gold as a safe-haven asset has slowly declined, coupled with the impact of profit-taking by some investors with long positions, resulting in a significant pullback in recent days. In my opinion, once geopolitical tensions subside, investors' focus will ultimately return to economic development. This may not bode well for gold in the short term. 

On the economic data front, the United States released economic figures higher than expected, with the Consumer Price Index (CPI) for March rising by 3.5%, slightly above expectations. This has led the futures market to virtually eliminate expectations of a rate cut by the Federal Reserve in June, with some large institutions even predicting a possible resumption of rate hikes. With high-interest rates support, the US dollar is likely to remain strong, while gold may face risks of adjustment and retreat. Continued attention to important economic data related to the US economy is needed to ascertain the Federal Reserve's future policy direction. Additionally, Federal Reserve Chairman Powell mentioned in his congressional testimony in March that the time to begin easing monetary policy "may be close," but stronger data support is still needed, particularly in indicators such as employment and inflation. 

From a technical standpoint, following the appearance of a large bearish candle on April 22, subsequent daily candles have shown small bearish candles with relatively long lower shadows. In the short term, gold prices are in a rebound, but the rebound strength is weak, and it appears to be a corrective bounce characterized by upward oscillation rather than strong bullish candles. Therefore, as time progresses, significant resistance is expected to be encountered around 2,360-2,370, which also represents the 61.8% retracement level of the downtrend. Further declines may occur in this area, with a high probability of breaking below the support at 2,291. Conversely, if significant bullish candles emerge in the future and close above the 2,370 level, there may be an opportunity to retest historical highs. In summary, the market is currently in a consolidation phase, and close attention is needed to monitor the support strength at the psychological levels of 2,370 on the upside and 2,300 on the downside. Waiting for stronger bullish candles to provide a clearer direction is advisable.

Hugo Leong

Gold Analyst of Hantec Group