Gold Slides Following Fresh Risk-On Rally in Global Equities

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Gold (XAU/USD) underwent a sharp retrace into the red zone in yesterday’s European session, hitting $1,704 in the early trading hours of today. At press time, the Gold spot is trading at $1,724, a 1% drop from yesterday’s high. This retrace was largely stimulated by the recent risk-on rally in global equity markets.

The growing expectations of implementation of additional stimulus relief packages across the globe coupled with the hopes for a swift V-shaped economic recovery are taking preference away from safe-haven assets like Gold and placing it in the global equity markets.

The Japanese government is contemplating a second COVID-19 relief package while the European Central Bank is expected to declare an additional €500 billion bond-buying program in its next meeting.

Notwithstanding the sudden bearish bias, the volatile civil unrest across cities in the US and the ever-increasing worries over the pandemic-induced economic strain will serve as a major obstacle for Gold bears.

Meanwhile, the medium-term bullish bias remains for the yellow metal as long as it sustains itself above the $1,700 pivot/psychological level.

Gold (XAU) Value Forecast — June 3

XAU/USD Major Bias: Bullish

Supply Levels: $1,730, $1,745, and $1,754

Demand Levels: $1,706, $1,700, and $1,694

Gold is in a recovery from yesterday’s unprecedented dip from the $1,745 resistance. The $1,717 is expected to hold and propel price to its previous high and above. However, if bulls fail to defend this level we could see a further decline to the $1,700 pivot.

Nonetheless, as long as gold price remains above $1,700, the overall bias remains bullish.

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