Gold Crashes Through 200-DMA Support, Rallies on 'Peace'

GOLD PRICES extended Friday's sharp decline Monday morning, sinking further below the 'key' technical indicator of its 200-day moving average before recovering all today's intraday losses by lunchtime in London after US President Trump declared that Iran and Israel had agreed to cease military strikes against each other following the weekend's escalation, writes Atsuko Whitehouse at BullionVault.

"Both sides, Israel and Iran, are looking to do an immediate CEASEFIRE!" the President tweeted.

"Final negotiations on 'Peace' are proceeding, subject to ignorance or stupidity getting in its way."

Crude oil see-sawed with gold yet again, surrendering more than half of Monday's earlier jump as the precious metal rebounded.

Global stock and bond markets also pared their losses while the US Dollar retreated from a 2-month high on the currency market.

"Gold on Friday broke below its 200-day moving average, accelerating the sell-off," says Jeff Toshima, former Tokyo director of the mining industry's World Gold Council, pointing to the widely-followed technical analysis tool and citing last week's news of robust US jobs growth in May as pushing up interest-rate expectations and the US Dollar.

The 'safe haven' metal had previously fallen to test gold's 200-DMA twice already since the Iran war began, first at the end of March and then in late May.

"Gold is behaving like a risk asset increasingly sensitive to the Fed narrative," says Nicky Shiels, head of metals strategy at Swiss bullion refining and finance group MKS Pamp, also pointing to gold being dumped by speculative traders after it breached the simple average of its past 200 trading-day prices.

With the interest-rate market now betting that the US central bank will raise its key borrowing cost by the end of the year, gold is "down with risk-off [but] goes nowhere with risk-on," Shiels says.

Betting on next week's June meeting of the Federal Reserve still shows near-certainty that the Fed will keep its policy rate unchanged at 3.62%, according to derivatives exchange the CME's FedWatch tool.

But the Fed funds rate will then be raised to end 2026 at 3.89%, more than three quarters of a point above the December level expected before the Iran war broke out.

"If recent trends continue, it may soon be appropriate to act," said Cleveland Fed President Beth Hammack after Friday's strong US non-farm jobs news.

But "there's no reason to raise interest rates," President Trump told NBC on Sunday, while maintaining that new Fed chairman Kevin Warsh should make his own policy decisions.

Wednesday will bring the US consumer price index (CPI) for May, with market consensus forecasts expecting inflation to have risen to 4.3% per year, the steepest rise in the cost of living since April 2023.

With global stock markets rallying after Trump's Iran-Israel announcement, the price of silver − now primarily an industrial metal that derives nearly 60% of its annual demand from productive uses − also recovered from an earlier crash, reducing its decline to 5.8% at $68.43 per ounce around Monday's 12 noon London auction.

"Not every correction is a warning signal," says a note from Swiss banking giant and London bullion clearing member UBS issued amid Friday's price plunge in precious metals.

"Some are simply the price of remaining invested in a structurally supported trend."

"The longer-term fundamentals supporting gold remain unchanged," agrees Jeff Toshima, "including continued central bank purchases, the ongoing trend of diversification away from the US Dollar, and concerns over fiscal sustainability" among major economies including Japan, Western Europe and the USA.

China's central bank continued accumulating gold in May, new data showed overnight, extending its buying streak to 19 consecutive months with reported data signalling a purchase of 10 tonnes, the heaviest monthly accumulation since December 2024.