Precious metals market

Gold came under renewed pressure in the first half of Monday’s session, alongside weakness across the major FX pairs, especially the EUR/USD. The gold weakness follows a relatively sharp two-day rally at the end of last week, which had raised hopes that the metal may finally have found a floor.

Gold has bounced from a major inflection zone, but bulls still need follow-through as next week’s CPI report puts the recovery to the test.

Markets went from risk off to risk on yesterday afternoon and we have since kicked on with some follow-up buying of stocks, gold and silver, while the dollar has also shown signs of weakness. Risk appetite turned positive after bond yields and oil prices both retreated yesterday.

Gold is attempting to break out after a brutal selloff, just as the US dollar and Treasury futures show signs of turning. Historical extremes, shifting momentum and key technical levels suggest a potentially important moment for gold traders.

Gold bears approach major support around $4,000, while USD/CHF shows signs of a bearish reversal. Middle East tensions add to market uncertainty.

Gold put in a sizable underside wick on the daily chart yesterday and this speaks to the possibility of near-term bottoming in the metal following a strong sell-off over the past six weeks.

As the trading week continues to unfold, gold is once again facing difficulties in regaining momentum in the short term. This can be seen in the performance of the last three trading sessions, where the metal has declined by approximately 0.9%, resuming a bearish dynamic that has once again become evident in recent market activity.

Gold is testing a major inflection zone as stretched downside momentum raises the risk for a reaction into key support.

Gold remains stuck between a rock and a hard place, with the directional bias remains tilted to the downside. While dovish Federal Reserve repricing and lower oil prices in the last couple of days has provided some support, the metal is still undermined by the elevated yields and the risks that oil prices may rebound and create fresh volatility for financial markets.

Gold bears remain in control as futures positioning weakens, but the 4,000 level could provide support and trigger a countertrend rebound.

With inflation still the Federal Reserve’s main concern and elevated oil prices keeping pressure on bond yields, the near-term gold outlook remains tilted to the downside, even if the longer term view remains constructive.

Gold started last week with a strong sell-off but from that move a bounce developed. Bulls could not hold on through the weekly close, however, and the bearish structure remains in-place for XAU/USD.