Traders and investors scaled back their open interest positions in the gold futures markets for the third consecutive session on June 15, that time by 846 contracts taking into consideration the advanced figures from CME Group. At the same time, volume decreased by about 92,500 contracts, reversing the previous build.
The price of gold is still supported near $1,850 after extending a leg lower on Tuesday. Nonetheless, the downtick was accompanied by dropping open interest and volume. This indicates that more retracement is not favored and it opens the door at the same time to a possible rebound happening in the short term.
For now, the gold bulls are trying to perform their last dance before Jerome Powell’s speech. The precious metal had dropped to retest the $1,850 support before rebounding to trade back around $1,860. The Federal Reserve’s decision and Jerome Powell’s policy outlook are expected to determine the next direction that gold will take.
With the June 15 drop, the Relative Strength Index (RSI) indicator slid below 50 for the first time in two months. This suggests that the bearish pressure continues to build up. Moreover, gold seems to remain on track to close below the 20-day SMA for the third consecutive day.
The price of the precious metal seems to have dropped below the ascending trend line coming from early April, and it confirms the possibility of a bearish shift in the short-term technical overview.
Today, XAU/USD is testing the Fibonacci 23.6% retracement of the current uptrend that is located around $1,855 currently. If the precious metal closes below this level, the next target is found at $1,840 (200-day SMA) ahead of $1,830 (50-day SMA).
Looking above, the first resistance is found at $1,885, where the 20-day SMA converges with the aforementioned trend line. In case the buyers and bulls lift the price above that strong resistance, the next line of defense has formed at the $1,900 psychological level.
After closing the first two days of the week in the nearly negative territory, gold remains uncertain of where it will head next, and it was last seen trading around $1,860 awaiting the next price action. It is up 0.12% on the daily basis.
On June 14, the benchmark 10-year US Treasury bond yield gained over 2% and made it quite challenging for gold to find considerable demand. Even though the 10-year US T-bond yield remains quiet near $1,860 on Wednesday, the bearish shift in the short-term technical outlook appears to be making it quite challenging for gold to attract more investors.
In the meantime, the data that was published by the US Bureau of Labor Statistics noted on June 15 that the Producer Price Index (PPI) in the United States for final demand increased to 6.6% on an annual basis in May from around 6.2% in April. The reading surpassed the market projection of 6.3%. For now, most investors opt to remain on the sidelines ahead of the FOMC’s policy announcement on Wednesday.
While previewing the FOMC’s June meeting, one analyst said:
“The Fed is running out of time. This may be the final meeting where the market will give the FOMC a pass before soaring prices force the credit markets to make their own choice. Be that as it may, Mr. Powell will do his best to delay that reckoning until the fall.”
Other data acquired from the United States on Tuesday showed that Retail Sales declined by 1.3% in May. Analysts expected it to fall by 0.8%. Also, the New York Fed’s Empire State Manufacturing Index declined to 17.4 in June from 24.3 in May. Nonetheless, these data points did not trigger a market reaction in the gold market in any significant way.