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Gold bulls start to give up as higher US interest rates reduce demand

Nick Goold

Gold

Gold has recorded a weekly loss for the third week in a row, which has weakened bullish sentiment, and traders are increasingly changing their bullish forecast for prices. The catalyst for the Gold selling is the increased chance of a US interest rise in June, making Gold a less attractive investment.

The $1,950 support level held at the start of the week but stronger than expected US inflation and economic data saw the 10-year US interest rise again to 3.81%, up 0.40% this month. While the US debt crisis has been bullish for Gold, the consensus is that a deal is getting closer, which reduces Gold`s appeal.

A US holiday on Monday and limited economic data releases this week until Friday`s US employment data make it likely that Gold will trade sideways in a range. Given the current downtrend and many traders still holding long positions, if the $1934 support level breaks, we could see another quick fall this week.

Gold chart May 29

Resistance: 1950, 1973, 2000, 2032, 2050, 2080

Support: 1935, 1918, 1900, 1889

WTI

WTI remained stuck in the narrow $70 to $75 range in the past week as traders waited for the outcome of the US debt negotiations. Optimism regarding negotiations pushed prices to $75, but sellers quickly capped prices to see the market close in the middle of the recent range.

Russian Deputy Prime Minister Alexander Novak commented that OPEC+ would not make additional steps to reduce production at the upcoming meeting in June, highlighting the current quiet WTI market.

The week ahead could see WTI prices test higher again, but swing traders will find better trading opportunities in other markets. Day traders should be wary of selling around $75 as WTI is due to make a significant move, given the recent quiet conditions.

WTI chart May 29

Resistance: 75.00, 79.00, 82.50

Support: 70.00, 65.00, 64.00, 62.00