Gold market has been negative during the month of May as interest rates continue to be a problem.
Higher interest rates in the United States, of course, will continue to work against the value of gold, as gold is a non-yielding asset.
Nonetheless, we are approaching an area of demand near the $4,500 level, and I think that will be the area to watch, followed by the $4,200 level for the month of June. Quite frankly, if we can get some interest rate relief during the month of June, then it's possible that we might be able to see the XAU/USD pair rally a bit.
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That being said, I would also point out that this is a market that, given enough time, I think will have to make a bigger decision as far as where to go longer term. The markets continue to be very difficult at times, and I do believe that you have to look at this through the prism of a market that, given enough time, will have to determine whether or not we are going to focus on interest rates or if we are going to start to focus on the risk appetite, and that might be driven solely by what happens in the Middle East.
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After all, we've been hearing for some time now that the Americans and the Iranians are at least trying to come together, but we have yet really seen anything concrete. The only thing that has happened, of course, is that the bombs have stopped flying.
Given enough time, that probably becomes a situation where we start to ask questions as to whether or not we continue, or if there is finally some type of resolution. Resolution to the conflict in the Middle East would be the first thing that would probably be a massive boom for gold, and in that environment, I think a lot of people would be watching very closely.
I have no interest in shorting gold, but I think you're going to have to be very cautious at this point in time.
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