Gold's Bullish Bias Amid Fed Crosscurrents and Trade Tensions

The gold market is caught in a tug-of-war between Fed rate cut expectations fueled by softening labor data and economic stability signals from a resilient unemployment rate. Yet, beneath the noise, technical dynamics and structural demand trends argue for a bullish bias. Let's dissect how investors can capitalize on this crossroads.

The Fed Dilemma: Jobs Data Sparks Rate Cut Debate

The May U.S. jobs report added 139,000 jobs, slightly above estimates but below revised prior-month figures, while wages rose 0.4% month-on-month. This mixed outcome leaves the Fed in a bind:
- Bullish for Gold: Downward revisions to prior job numbers (a cumulative 95,000 reduction) suggest underlying weakness, bolstering arguments for rate cuts by December 2025. Lower rates reduce the opportunity cost of holding non-yielding assets like gold.
- Bearish Pressure: The stable 4.2% unemployment rate and rising wage growth hint at labor market resilience, which could delay easing and keep the Fed's hawkish bias intact.

Technical Analysis: Key Levels Define the Bullish Case

Gold ($3,373/oz as of June 6) is dancing near critical technical thresholds:
- Support at $3,345: A break here could trigger a drop to $3,300, but this level has historically held during dips. Recent consolidation above $3,345 suggests buyers remain in control.
- Resistance at $3,380: A sustained breach would open the door to $3,435, aligning with the parabolic base breakout pattern formed since 2020.

Why the Bullish Edge?
- The RSI remains neutral (53), avoiding overbought/oversold extremes.
- The Ichimoku cloud and moving averages (200-day, 50-day) are bullish, signaling upward momentum.
- Volume spikes at $3,345 confirm buyer interest during dips.

Central Banks and Physical Demand: The Structural Floor

Even as ETFs recorded $1.8 billion in outflows in May—driven by U.S.-China trade optimism and rising rate expectations—two pillars underpin gold's resilience:
1. Central Bank Buying: Institutions are on track to purchase 900-1,000 tons in 2025, the fourth straight year of record accumulation. Poland, Azerbaijan, and China continue buying, while Iran's potential entry adds geopolitical intrigue.
2. Asian Physical Demand: Despite soaring prices ($3,500/oz peaks in April), India and China's cultural affinity for gold ensures demand. China's pilot program allowing insurers to hold gold, and India's reduced import duties, are structural tailwinds.

Investment Thesis: Capitalize on the Dips

The $3,345 support zone is a buying opportunity for three reasons:
1. Trade Tensions Remain Unresolved: U.S.-China tariff disputes and Middle Eastern instability keep safe-haven demand alive.
2. ETF Outflows Are Structural, Not Fundamental: While ETFs sold on optimism, central bank and physical buyers offset this, maintaining a long-term upward bias.
3. Fed's Delayed Easing Still a Catalyst: Even if cuts are delayed to December, the eventual move will erode real yields and boost gold.

Actionable Strategy:
- Buy on dips to $3,345: Target $3,380 initially, with $3,435 as the next bull target.
- Avoid overcommitting above $3,380: Resistance here could trigger profit-taking until a breakout is confirmed.

Risks to the Bullish Narrative

• Trade Deal Breakthrough: A sudden U.S.-China agreement could send gold to $3,100-$3,300 as risk-on sentiment surges.
• Stronger-than-Expected Wage Growth: A sustained rise in wages could force the Fed to tighten, hurting gold.

Conclusion: Bulls Hold the High Ground

Gold's technical structure, central bank support, and Asia's physical demand create a solid bullish framework, even as the Fed's path remains cloudy. The $3,345-$3,380 range is a battleground, but the next major move is likely upward. Investors should lean bullish, using dips to build positions. As always, monitor geopolitical headlines and Fed commentary for catalysts.

Gary's Bottom Line: The Fed's crosscurrents are a temporary hurdle. With trade risks unresolved and buyers waiting at $3,345, gold's bull run has further to climb.