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Bearish Pressure Could Resume if Gold Fails to Break 3400
Commodity
Economic
Summary:
The inability to form a new local high signals a possible loss of bullish momentum in the short term.
Sell
CLOSEDXAUUSD
End Time
3389.23
Entry Price
3345.00
TP
3415.00
SL
3441.97 +9.11 +0.27%
2577
Points
Loss
3345.00
TP
3415.09
CLOSING
3389.23
Entry Price
3415.00
SL
Thursday’s release of the U.S. Producer Price Index (PPI) added to mounting evidence that inflationary pressures may be easing at the wholesale level. Headline PPI rose by 2.6% year-over-year in May, in line with analysts’ forecasts and slightly above the 2.5% recorded in April. Meanwhile, the core PPI—which excludes food and energy—declined to 3.0% from April’s 3.2%, suggesting that underlying pricing pressures are gradually moderating.
Following Wednesday’s downside surprise in the Consumer Price Index (CPI), this additional confirmation of a cooling inflation trend has bolstered market speculation that the Federal Reserve may be on track to deliver a rate cut as early as September. The softer inflation backdrop is generally seen as supportive for gold, which tends to benefit from lower interest rate expectations due to its non-yielding nature.
Adding to gold’s bullish fundamentals are growing geopolitical risks. Reports suggesting that Israel may be weighing a potential military strike against Iran have stirred fears of an escalating conflict in the Middle East. At the same time, renewed tariff threats from former U.S. President Donald Trump are feeding safe-haven demand, further underpinning the precious metal’s appeal in uncertain times.
On the macroeconomic front, U.S. Non-Farm Payrolls (NFP) data for May showed a stronger-than-expected gain of 139,000 jobs, exceeding market consensus of 130,000. The unemployment rate held steady at 4.2%, while average hourly earnings remained at a firm 3.9% year-over-year—both figures reinforcing the view that the labor market, though cooling, continues to show underlying strength.
In addition, the NFIB Small Business Optimism Index surprised to the upside, posting its first monthly increase since December. The improvement hints at a potential shift in business sentiment after months of weakness and could signal a budding sense of economic stability among smaller enterprises.
Elsewhere, the New York Fed’s Survey of Consumer Expectations (SCE) indicated a broad decline in inflation expectations across one-, three-, and five-year horizons. While this decline is generally encouraging from a monetary policy perspective, it was accompanied by a noticeable deterioration in household sentiment. Respondents expressed weaker views of their present and future financial situations, highlighting the fragile nature of consumer confidence amid conflicting economic signals.
Technical Analysis
Gold (XAU/USD) has once again encountered strong resistance near the 3400 level, marking the third time price has failed to break higher at this zone. This repeated rejection could trigger a wave of profit-taking among bullish traders, increasing the likelihood of a corrective move lower. The inability to form a new local high signals a possible loss of bullish momentum in the short term.
However, it’s worth noting that the broader trend remains upward, and gold continues to respect a rising trendline. So far, price action has not breached this structure with a lower low, suggesting the area around the trendline may serve as a key support level.
The 100- and 200-period moving averages, currently located at 3336 and 3348 respectively, converge near a previously tested support zone. This region could act as a gravitational pull for price, given its history as a pivot point for both rebounds and rejections. If bearish pressure intensifies, this area could become a primary target for sellers.
Meanwhile, the Relative Strength Index (RSI) currently sits at 61, indicating that there is still room before entering overbought territory. However, a developing bearish divergence on the RSI may hint at weakening momentum and open the door for a downside retracement.
Should gold manage to break decisively above the 3400 level with strong volume, the bullish trend could continue toward new highs. On the other hand, if resistance holds and selling pressure increases, a pullback toward 3345 becomes increasingly likely in the near term.
Trading Recommendations
Trading direction: Sell
Entry price: 3386
Target price: 3345
Stop loss: 3415
Validity: Jun 20, 2025 15:00:00
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