In the minutes of the Federal Reserve's May monetary policy meeting, several policymakers expressed the need for more time to confirm that inflation has returned to the 2% target level. Although recent economic data suggests that inflation is slowing, most officials recommended waiting a few more months to ensure this trend is sustainable before considering lowering interest rates.

Some officials indicated in the meeting minutes that if the inflation outlook significantly deviates from expectations, more stringent monetary policies might be necessary, implying a prolonged high-interest-rate environment. These statements have raised market concerns. Concurrently, economic data continues to improve, with initial jobless claims decreasing and industry activity PMI indices exceeding expectations. This suggests that the decline in inflation may be slowing. Consequently, the market has significantly reduced the likelihood of the Federal Reserve lowering interest rates from summer through the end of the year. Some analytical institutions even predict that rate cuts might be delayed until autumn. As a result, the dollar has rebounded from its lows, and gold prices have seen substantial corrections recently. 

From a technical perspective, the previous high of 2,417 was breached but failed to sustain the upward momentum. The significant decline on May 23 formed a standard bearish pattern, resonating across daily, 4-hour, and 1-hour charts, where a notable head-and-shoulders pattern is visible, suggesting a potential downward reversal.

However, this could also be viewed as a large consolidation phase between 2,281 and 2,417 (as indicated by the green zone in the chart). In the short term, it's advisable to seek trading directions within this range; the 2,270 to 2,280 USD range serves as a crucial support level, with 2,280 USD also marking the starting point of the early May uptrend. Given the current momentum of gold, it is likely to test this level, and a short-term strategy of selling gold on rebounds could be considered, targeting 2,280 USD. If this level fails to hold, there is a risk of a further decline, potentially leading to a deeper downtrend. Conversely, a rebound above 2,400 USD could lead to another test of the high at 2,450 USD.

Hugo Leong

Gold Analyst of Hantec Group