Executive Summary

Precious metals begin the week nursing wounds from Friday's sharp sell-off, with gold trading near $2,310 and silver hovering around $29.20 after the strongest U.S. jobs report in months crushed rate cut hopes and China unexpectedly halted its 18-month gold buying spree. This week's Federal Reserve meeting (June 11-12) will set the tone for precious metals through summer, with markets bracing for a hawkish hold and reduced rate cut projections.

Despite Friday's 3.7% gold plunge and 7% silver collapse, year-to-date gains remain robust at approximately 12% and 22% respectively, suggesting the bull market remains intact but faces near-term headwinds. The convergence of Fed policy expectations, China's buying pause, and seasonal weakness creates a pivotal test for metals' resilience.

Technical indicators flash caution with gold breaking below its 50-day moving average and silver plunging to oversold conditions. Yet central bank demand (excluding China) remains strong, and any dovish surprise from the Fed could quickly reverse Friday's losses.

Current Market Position

Prices as of Monday, June 10, 2024 at 9:00 AM ET

Technical Analysis

Gold: Critical Support Test at $2,300

Gold faces an immediate test of the psychologically important $2,300 support level after Friday's breakdown. The 50-day moving average near $2,320 had provided reliable support throughout May but was decisively breached in Friday's sell-off. A failure to hold $2,300 this week could expose the next major support zone around $2,225, coinciding with the 20-week exponential moving average.

RSI readings have plunged to 42, approaching oversold territory but not yet at extreme levels that would suggest an immediate bounce. The MACD histogram shows accelerating negative momentum, warning of potential further downside. Bulls need to defend $2,300 and reclaim $2,350 to stabilize the technical picture.

Silver: Extreme Oversold Conditions Create Opportunity

Silver's technical damage appears more severe, with the metal losing its grip on the $30 psychological level that had acted as resistance for months before May's breakout. The white metal must defend support in the $28.00-$28.50 zone to prevent a deeper correction toward the 50-day moving average near $27.50.

However, RSI at 28 signals the most oversold conditions since March, historically a reliable entry point for nimble traders. The gold-silver ratio has expanded back above 79, suggesting silver's recent outperformance may be reversing but also creating potential value for patient investors.

Week Ahead Calendar

Key Themes for the Week

Fed Policy Trajectory

Wednesday's FOMC meeting dominates the landscape. With inflation proving stickier than anticipated and labor markets showing resilience, the Fed faces a delicate balancing act. The updated Summary of Economic Projections will reveal whether officials still see rate cuts this year or have pushed them entirely into 2025.

Market expectations have shifted dramatically - from six cuts priced at year-start to perhaps only one by December. This recalibration has strengthened the dollar and raised real yields, creating headwinds for non-yielding assets like gold. Any hint from Powell that the Fed might tolerate higher inflation temporarily could provide relief.

China's Strategic Pause

The People's Bank of China's decision to halt gold purchases after 18 consecutive months removes a critical demand pillar. China had added over 300 tonnes during the buying spree, helping propel gold to record highs. The pause at 72.80 million troy ounces suggests either price sensitivity around $2,400 or achievement of strategic reserve targets.

This development bears watching as China has been the marginal buyer supporting prices. However, other central banks continue accumulating, with Poland, India, and Turkey maintaining aggressive purchase programs. Net central bank demand remains historically elevated even without China's participation.

Seasonal Patterns and Physical Demand

June historically ranks among the weakest months for precious metals performance, with the "sell in May and go away" phenomenon typically extending through July. Indian wedding season won't resume until October, removing a traditional source of physical support during summer months.

However, any seasonal weakness could attract bargain hunting from Asian buyers if prices dip toward $2,250 gold and $27 silver. The Shanghai premium over London prices bears monitoring as an indicator of Chinese physical appetite at lower levels.

Trading Scenarios

Week Ahead Outlook

Precious metals enter a make-or-break week with technical damage from Friday's plunge still fresh. The combination of China's buying halt, strong U.S. employment data, and looming Fed decision creates a perfect storm of uncertainty. Yet extreme bearish sentiment often marks interim bottoms, particularly when fundamental drivers remain supportive.

For traders, the key lies in respecting support levels while remaining nimble around high-impact events. Gold's defense of $2,300 becomes critical - a weekly close below would signal deeper correction potential toward $2,200. Silver's oversold bounce from $28.50 offers better risk-reward for aggressive longs.

Longer-term investors might view any Fed-induced weakness as opportunity. Central bank diversification continues, supply constraints persist, and fiscal deficits show no signs of meaningful reduction. The structural case for precious metals remains intact even as cyclical headwinds intensify. Summer seasonals suggest patience may be rewarded with better entry points ahead.

Wednesday afternoon brings maximum event risk. Position accordingly with wider stops and reduced leverage. The Fed's message on inflation tolerance and rate cut timing will echo through summer trading, potentially setting up autumn's directional move. In this environment, preservation of capital takes precedence over aggressive positioning until clarity emerges.