05.06.202609:27 Forex Analysis & Reviews: Gold Fluctuates Sideways

Judging by the quotes, gold stubbornly refuses to end the week in decline, even though it is currently trading about 2% lower than the opening at $4,453 per ounce.

It is evident that the week has been busy in a negative sense: the most serious clashes in the Middle East since the April ceasefire, the failure of the Lebanon-Israel agreement, and yet another deadlock in U.S.-Iran negotiations.

The negotiating situation by the end of the week looks worse than at the beginning. Hezbollah rejected the ceasefire with Israel brokered by the U.S. Iranian forces launched missile and drone strikes on Kuwait and Bahrain. The U.S. struck an oil tanker heading to Iran. However, Trump stated in his usual fashion that negotiations are at a final stage, although Iranian Foreign Minister Araghchi responded the same day that no tangible progress had been made.

The market has been living in this cycle of mutually exclusive statements for several weeks now and is gradually ceasing to react to it.

For gold, the issue is not so much geopolitics as how it influences rates. The closed Strait of Hormuz keeps oil prices high, high oil prices drive inflation, and inflation forces central banks to tighten policy — and all of this weighs on the non-yielding metal. Additionally, technically, the metal is trading below key levels on the daily and four-hour charts, indicating the continuation of a negative trend.

At the same time, central banks are not giving the market cause for optimism. The president of the San Francisco Fed, Mary Daly, stated yesterday that there is too much uncertainty in the economy for rate predictions, adding: "We are prepared to respond in any case, regardless of what the economy brings." This is not a dovish signal — it is a signal of readiness to raise rates if necessary. The president of the Dallas Fed, Logan, said the same thing the day before, but more directly.

Tonight, the U.S. employment report for May will be released — and it will determine the tone for the next week. If the Non-Farm Payrolls are stronger than the expected 85,000, the odds for a Fed rate hike will increase — and gold will be under additional pressure. Silver is falling more aggressively today — down 1.7% to $72.61. Platinum is declining, while palladium is rising slightly.

Regarding the current technical picture for gold, buyers need to reclaim the nearest resistance at $4,481. This will allow targeting $4,546, above which it will be quite problematic to break through. The furthest target will be the $4,607 area. If gold falls, bears will attempt to take control at $4,432. If this is successful, breaking the range will deliver a serious blow to the bulls' positions and push gold down to a low of $4,372, with the potential to reach $4,304.