Rising Expectations of Fed Rate Cut Drive Up Gold and Oil Prices

Boosted by China’s announcement of new economic measures and rising expectations of a Fed rate cut, gold prices rose nearly USD 40 last Friday, marking the second consecutive week of gains. After a drop in weekly initial jobless claims in the US, oil prices saw a stronger rebound.

The labor market is gradually easing, and the trend of inflation returning to a downward path has increased the likelihood of a rate cut in September. Oil prices continued the momentum of the previous day’s rebound from a low, closing higher for the second consecutive day last Friday.

Gold >>

Last Friday, boosted by China’s announcement of new economic measures and rising expectations of a U.S. rate cut, gold prices surged nearly USD 40, marking the second consecutive week of gains.

Spot gold experienced high volatility, hitting a more than one-month high of USD 2,425.17 per ounce before closing up 1.58% at USD 2,414.50 per ounce.

Last Thursday, the U.S. released mixed economic data, and Federal Reserve officials reiterated that the pace of inflation decline is still insufficient to consider a rate cut, leading to a drop in the dollar and U.S. Treasury yields. This had a neutralizing effect on gold prices.

After reaching a one-month high last Thursday, gold prices continued their two-week upward trend. China’s demand has driven gold prices higher in recent months, but the market is watching to see if high gold prices will prompt some central banks to slow their purchases.

Additionally, there has been a continuous outflow of funds from physically backed gold exchange-traded funds, making China’s demand increasingly significant.

This Wednesday, U.S. existing home sales data for April and the minutes from the May FOMC monetary policy meeting will be released. On Thursday, the market will receive preliminary data for the S&P Manufacturing and Services PMI, weekly initial jobless claims, and April new home sales data.

On Friday, the April durable goods report will be released. After a slight pullback and correction last Friday, gold prices stabilized in the morning, beginning to rally above USD 2,380.

By the U.S. trading session, prices had broken through the USD 2,410 level again, reaching around USD 2,418 before pausing. In the short term, gold is expected to continue setting new recent highs, approaching previous peaks.

Technical Analysis:

Today’s short-term strategy for gold suggests prioritizing short positions during rebounds, with long positions considered as a secondary approach during pullbacks.

  • Key resistance levels to watch in the short term are around 2450-2455.
  • Key support levels to watch in the short term are around 2420-2415.

WTI Crude Oil >>

Last Friday, after the weekly U.S. initial jobless claims decreased, oil prices saw a stronger rebound. The gradually easing labor market and the resumption of the downward inflation trend increased the likelihood of a rate cut in September.

Oil prices continued the previous day’s rebound momentum, closing higher for the second consecutive day. WTI crude rose 1.05%, closing at USD 80.06 per barrel, while Brent crude rose 0.85%, closing at USD 83.98 per barrel.

As the peak consumption season approaches, U.S. gasoline prices stabilized and rebounded, with refining margins showing some recovery. The market currently sees some positive demand signals, and if these strengthen further, it could help restore market confidence.

Despite the release of the three major monthly reports, oil prices have not changed the current stalemate. Traders are awaiting the next significant catalyst for the oil market, with many expecting the OPEC+ meeting on June 1 to provide insights.

Last Friday, crude oil prices dipped and then rebounded, forming a doji candlestick pattern. Prices stabilized after hitting a low of USD 78.18 and reached the previous high of USD 79.85, but closed just below this level.

The inability to break and close higher indicates that short-term prices may continue to fluctuate, with repeated dips and recoveries forming a bottom and subsequent rebounds.

Technical Analysis:

Today’s crude oil trading strategy suggests prioritizing short positions during rebounds, with long positions considered as a secondary approach during pullbacks

  • Key resistance levels to monitor in the short term are around 81.0-81.5.
  • Key support levels to monitor in the short term are around 78.5-78.0.

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