Today's Asian markets saw gold's defense wall finally collapse. After a dull consolidation phase, XAUUSD chose to plunge lower, challenging a one-week low around $4,561 as soon as the London market opened.
The market atmosphere is now shrouded in pressure, investors are starting to panic at the drastic recovery of the US Dollar driven by the Federal Reserve's "hawkish" narrative that refuses to soften. This selling momentum seems to tell us that the "safe haven" of gold is losing its magic in the face of an increasingly powerful Dollar.
President Trump's statement claiming that he "will no longer be patient with Iran" has poured gasoline on the market fire. What happened was that crude oil prices immediately surged, which indirectly stirred up the unresolved inflationary concerns.
For the Fed, high inflation means that interest rates need to remain higher for longer. The effect? Non-yielding assets like gold are the victims of the situation while the Dollar is partying.
Beijing Summit Wraps Up: Xi & Trump Shake Hands
The US-China summit seems to have provided some relief. Xi Jinping and Trump agreed to stabilize trade relations, which were described as “very strong”.
China has also agreed to urge Iran to reopen the Strait of Hormuz. Investors are now waiting for any official action by the US and China in an effort to realize the recovery of global oil pressure.
Investors and traders are now turning their attention to Putin’s visit to Beijing on May 20 for further geopolitical clues.
MARKET TECHNICAL STRUCTURE
Key Support ($4,543.95): This is the line that separates hope from disaster. This level has been a zone where buyers have gathered before. If this level is successfully defended, we may see a technical rebound to retest the resistance of $4,818.34.
Bearish Target ($4,319.38): The story is simple, if this $4,543.95 price level is broken, gold has little resistance to slide deeper. This will open up space for new momentum that could take the price to a lower psychological level.
IMPORTANT UPCOMING EVENTS
Putin's visit to Beijing (May 20): The market is very sensitive to the Russia-China alliance. Any statement about dedollarization or a new military alliance will trigger high volatility in the USD and gold.
Fed's Further Statement: Traders are waiting to see if the new Fed leadership Kevin Warsh will confirm further interest rate hikes following the surge in oil prices and the official statement of the official US-China meeting.
My advice to fellow traders: Don't try to "catch the falling knife" as long as the $4,543.95 level has not shown a strong reversal reaction.
The market is currently full of emotions and fast political statements. Stay disciplined, pay attention to the Dollar's movements, and don't let Trump's emotions burn your account.
