Gold outlook remains bearish; yellow metal may fall towards $4,099: Analyst

Performance 

 

On June 4, spot gold prices traded between $4,424 and $4,516.

 

Weak-looking gold prices once again found support around the 200-day moving average (DMA) and recovered on hopes of a US-Iran deal, as Israel and Lebanon agreed to a ceasefire. However, the precious metal trimmed its intraday gains as doubts once again emerged regarding the Israel-Lebanon ceasefire.

 

At the time of writing, the yellow metal was trading with an intraday gain of around 1 per cent at $4,484.

Geopolitics and Oil

Israel and Lebanon agreed during talks held at the State Department in Washington on Wednesday to implement a ceasefire deal that does not involve Hezbollah. Hezbollah, the Iranian-backed group that is not part of the Lebanese government, was not present at the talks. The initial ceasefire deal reached in April also did not include Hezbollah.

 

 

Under the new agreement, backed by the United States, Hezbollah is expected to cease firing on Israel and withdraw from southern Lebanon. The Lebanese military will take full control of newly established "pilot zones" free of any non-state armed groups. Reports suggest that Israeli troops have withdrawn from a town in southern Lebanon.

 

However, as expected, Hezbollah rejected the ceasefire deal and demanded the complete withdrawal of Israeli troops from Lebanon.

 

The US House passed a resolution on Wednesday to block President Donald Trump from ordering further strikes on Iran. However, Congress faces several hurdles before it can compel Trump to end hostilities.

 

US crude oil inventories held by companies fell by 8 million barrels last week, marking the eighth consecutive weekly decline, and are now 3 per cent below the five-year average. The US government also released 8 million barrels from the Strategic Petroleum Reserve (SPR), bringing inventories close to the low reached in July 2023 after the Biden administration tapped reserves following Russia's invasion of Ukraine.

 

Oil prices fell on Thursday following the Israel-Lebanon ceasefire announcement, but downside risks remain limited unless the US and Iran reach a formal agreement to normalise traffic through the Strait of Hormuz. Several oil executives have recently warned that rapidly declining oil inventories could lead to a spike in fuel prices in the near future.

 

At the time of writing, Brent crude was trading with an intraday loss of 3 per cent at $94.75.

Data and events roundup

US initial jobless claims rose from 215,000 to 225,000 (forecast: 212,000) in the week ending May 30, marking the highest level since the Iran conflict began. However, continuing claims fell from 1.785 million to 1.777 million (forecast: 1.780 million).

 

Unit labour costs were revised to 1.8 per cent in the final reading, significantly below both the forecast of 2.4 per cent and the previous estimate of 2.3 per cent.

 

The Institute for Supply Management's (ISM) Services Index rose to a three-month high of 54.5 (forecast: 53.8; previous: 53.6), supported by increases in both new orders and business activity.

 

It is worth noting that other US economic indicators released this week—including ISM Manufacturing, JOLTS job openings, and ADP employment data—have also been encouraging.

 

The number of British workers facing potential job losses rose to its highest level in more than five years, reflecting a deteriorating labour market amid the economic impact of the Middle East conflict. More than 37,000 potential layoff notices were filed in the four weeks to May 24, up 62 per cent from the same period last year, according to data from the Insolvency Service.

Gold ETFs and COMEX inventory

Total known global gold ETF holdings fell to 98.25 million ounces (Moz) on June 4, the lowest level since mid-December 2025.

 

Holdings have declined by 0.70 Moz (21.1 tonnes) year-to-date and are currently down 83 tonnes since the beginning of the Iran conflict on February 28.

 

Registered COMEX gold inventory stood at 15.29 Moz, down 8.96 Moz from the record peak of 24.25 Moz reached in April last year during the escalation of global trade tensions.

 

Central Banks buy Gold in April

Global central banks remained net buyers of gold in April, purchasing a net 14 tonnes. Poland (14 tonnes) and China (8 tonnes) were among the largest buyers.

 

Central Banks' Gold holdings surpass US treasury holdings

The European Central Bank stated that gold accounted for 27 per cent of global official foreign reserves at the end of 2025, while US Treasury securities represented 22 per cent, and the euro accounted for 15 per cent.

 

However, the ECB noted that gold's share surpassed Treasuries and the euro largely because of valuation effects, as gold prices rose sharply—by 60 per cent in 2025 and 30 per cent in 2024. Excluding these valuation effects, gold would account for only 16 per cent of global reserves, matching the euro's share and remaining below US Treasuries at 26 per cent.

 

The ECB also cautioned that gold faces structural limitations as a reserve asset compared with major fiat currencies due to its high volatility and storage costs.

Central Bank watch

The European Central Bank is expected to raise its benchmark interest rate by 25 basis points on June 11 to curb inflationary pressures arising from elevated oil prices linked to the Iran conflict.

 

Overnight futures markets indicate that the Federal Reserve is expected to raise interest rates by a cumulative 25 basis points by March 2027.

Upcoming data

The US will release its May non-farm payrolls report on June 5. Based on recent ADP employment data, the report is expected to be relatively encouraging, similar to the previous two releases.

 

The US Consumer Price Index (CPI) report for June will be released on June 10, followed by the Producer Price Index (PPI) report on June 11.

 

Market participants will also monitor the Eurozone's final first-quarter GDP data, due on June 5.

 

China's trade balance data (June 9) and inflation figures (June 10) will also remain in focus.

Outlook

Although the Israel-Lebanon ceasefire has eased Middle East tensions to some extent, its impact may be limited given that Hezbollah is not a party to the agreement. In addition, the US and Iran remain far apart on key issues. Unless a formal and mutually acceptable agreement is reached that enables the reopening and normalisation of traffic through the Strait of Hormuz, oil prices are likely to remain elevated, thereby sustaining concerns over further interest rate hikes.

 

Gold ETF flows remain uninspiring, as investors continue to be deterred by elevated volatility and the prospect of higher interest rates.

 

Safe-haven demand for gold has also remained subdued amid strong performance in equity markets.

 

Despite high oil prices, the probability of a US recession over the next 12 months has fallen from 30 per cent to 25 per cent, returning to pre-Iran conflict levels.

 

Overall, the outlook for gold remains bearish. A decisive break below support at $4,400 could bring $4,366 into focus. A decline towards $4,099—the cycle low reached on March 23—cannot be ruled out.

 

Major resistance levels are seen at $4,550, $4,610, and $4,670.

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(Disclaimer: This article is written by Praveen Singh, head of commodities, Mirae Asset Sharekhan. Views expressed are his own.)