Gold Plunges, Then Soars Back!
On Monday (June 11th), spot gold rebounded by $17 after a sharp drop in the previous trading session and broke through the $2,310 per ounce threshold.
FXStreet analyst Christian Borjon Valencia recently wrote an article analyzing the technical trend of gold prices.
Valencia noted that despite the rise in U.S. Treasury yields, gold prices continued to strengthen.
The upcoming U.S. inflation data and the Federal Reserve's decision may influence the future trend of gold.
The yield on the 10-year U.S. Treasury bond rose by 3.5 basis points on Monday, reaching 4.47%, which is a negative factor for gold.
The U.S. Dollar Index increased by 0.23%, reaching 105.17.
Spot gold closed up $17.07 on Monday, a gain of 0.74%, closing at $2,310.81 per ounce.
Phillip Streible, Chief Market Strategist at Blue Line Futures, believes that gold prices seemed to have been oversold last Friday, leading to buying on the dip.
Streible said, "With so much data and events coming up, there will be more volatility and more highlights this week."
Spot gold closed down $82.09 last Friday, a drop of 3.46%, with the gold price closing at $2,293.74 per ounce.
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In addition to investors buying on the dip, geopolitical tensions also provided support for gold prices.
On June 10th, Sky News reported that a Ukrainian source stated that the Ukrainian Armed Forces' fighter jets had attacked targets inside Russia for the first time on the 9th.
The source said that the results of the operation are still being assessed, but it can be confirmed that this was a "direct strike," the first time the Ukrainian Air Force has used air-launched weapons to attack targets inside Russia.
Previously, Ukraine had been using drones to attack targets inside Russia.
The use of fighter jets for direct attacks may be seen by Moscow as an escalation of the situation.
In the latest technical analysis of gold, FXStreet analyst Christian Borjon Valencia pointed out that gold prices are consolidating above $2,300 per ounce, but a head and shoulders pattern appears on the technical chart.
As the Relative Strength Index (RSI) shows, momentum has turned bearish, with the index falling below the 50-line, indicating that sellers are taking control of the market.
Valencia said that, therefore, if gold continues to weaken, sellers may push the price of spot gold below $2,300 per ounce.
Once this level is breached, the next target will be the low of $2,277 per ounce on May 3rd, followed by the high of $2,222 per ounce on March 21st.
If gold prices continue to weaken, the next line of defense for buyers will be around $2,200 per ounce.
Valencia added that, on the other hand, if gold buyers push the price above $2,350 per ounce, it is expected that gold prices will consolidate in the $2,350-$2,380 per ounce range.