Gold Monthly Forecast – June 2018

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Published: Jun 3, 2018, 17:29 UTC

Gold prices fell during the course of May and are expected to stay weak

Market for safe haven investment options have been on decline for month of May. This scenario began mid-April when US Greenback began growing strong against major global currencies. Global currency trading saw increased activity for last 40 days on any instruments liked with US Dollar. US Greenback continued to grow strong against both safe haven options, Oil and global currencies which was strongly influenced by positive growth in US economic scenario and increased treasury yields. Despite a slew of Geo-political issues such as Government crack downs, threat of trade wars and possible escalation of N.Korean issues Gold as a safe haven investment has lost is usual luster during the month of May 2018.

Gold Trades Lower

The XAUUSD pair traded for majority of 2018 well inside multiyear top price range. The pair managed to trade in a range of $1364 to $1304 in a range bound pattern for first three months of the year. However during the month of April US Treasury Yields reached multi year highs at above 3% which resulted in a spike of investment around US Treasury notes and this in turn gave US Greenback a great bullish trigger against most commonly traded global instruments. This was a turning point in both currency and precious metals trading segment. As of April month’s trade closure the XAUUSD pair had hit $1310 price range on its steep bearish decline.

Gold Weekly

Despite the recent decline in gold price, the first week of May 2018 saw gold turn range bound due to lack of bullish triggers. US calendar produced employment data in the form of NFP which is regularly looked upon during the first week of a month and the outcome was disappointing which resulted in gold price seeing slight upward momentum. The pair traded for the first week of may 2018 within $1303 to $1317 price range. The second week of May was also in favor of yellow metal with most of market focusing on geo-political issues such as US President Trump’s decision to pull out of nuclear deal with IRAN and subsequent missile launch on Iranian strongholds in SYRIA by ISRAEL. Investors also focused on slight tensions between US & China and inflation data in US markets. Both CPI and PPI data turned out to be dovish well in line with public opinion post disappointing employment data the previous week and all these factors led to Yellow metal making a sharp rebound with price moving as high as $1326 as trading session closed for the week.
The pair opened on positive note for third week of May with slight range bound momentum owning to light macro calendar, however the pair remained in above $1320 on Monday. Tuesday saw US Greenback gain momentum against precious metals and major global currencies US bond yields saw a positive spike in value reaching new 2018 high’s post St Louis Fed James Bullard’s speech which signaled possibility of a rate hike in near future. This caused US Greenback to gain enough momentum to pressure yellow metal to breach the $1300 price range for first time in 2018 with the pair moving as low as $1288. As the week moved forward of US Fed who spoke at various occasion across the country mentioned the possibility of four rate hikes by US Fed within the year which caused yellow metal to hit this year’s lowest price at $1282.20 as trading session closed for the third week of May.

Gold Expected to Stay Weak

The Fourth week of May was in favor of yellow metal. While investors were on lookout for further news of rate hike from FOMC minutes, two of three FOMC members sounded dovish during their speech and FOMC statement which showed Fed’s decision to back off the inflation target at 2% was viewed by many as less aggressive approach turning market sentiment against US Greenback. Investors took to cautious note over troubles caused by US President Trump as he decided to call off summit with North Korea and impose tariff on import of Steel and Aluminum from its three major allies Europe, Canada and Mexico which caused US dollar to take a huge bearish hit which helped the yellow metal get back up from 2018 lows. However the momentum in favor of Yellow metal was cut short as North Korea issued a statement that said the country is still open for negotiations if US government wants to resume talks.
The last week of May saw yellow metal regain foothold above $1300 over political uncertainties in various European countries. Italian government faces possibility of another election in near future but managed to form a cabinet resolving the deadlock situation. Meanwhile Spanish Prime minister Mariano Rajoy was ousted from his position with a no-confidence vote and was replaced by socialist leader Pedro Sanchez. However US Greenback also grew strong supported by increased buying activity as investors were attracted to US bonds with better yields which capped yellow metal’s ascension at $1305 price handle and the pair closed for the week with range bound performance at $1293.29. With US treasury notes and US bond yields taking a hawkish stance and fresh global developments supporting growth of US Greenback’s bullish momentum, FOMC is expected to adopt aggressive approach towards normalizing monetary policy and this is expected to hamper yellow metals uptrend movement. The first week of June 2018 is expected to see bearish movement in XAUUSD pair.

About the Author

Colin Firstauthor

Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.