Scotiabank’s Global FX Strategy team reported thin liquidity and light volumes, citing holidays in the US and UK. US equity futures pushed to fresh highs, while global benchmark oil prices fell by about $5/bbl on the day, contributing to a bullish market tone. The bank also described the USD as broadly weaker against all G10 currencies, alongside renewed confidence in the prospect of a US/Iran deal.
In commodities, the team pointed to renewed strength in copper as it retraces a recent pullback after record highs in mid-May. Gold, by contrast, was framed around a key technical level: $4500/oz has so far acted as support. A break below that threshold would, on Scotiabank’s measured-move projections, imply a move of roughly $800/oz lower from the level mentioned. The article was produced using an AI tool and reviewed by an editor.
Risk Appetite And Market Drivers
We see a strong appetite for risk in the market, with US equity futures pushing towards new records above the 6,500 S&P level. The US dollar is weak across the board, with the Dollar Index (DXY) now trading around 98.50. Markets are increasingly pricing in a potential Federal Reserve interest rate cut later this year, which is weighing on the currency.
This risk-on environment is renewing strength in industrial metals like copper, which is recovering from its recent pullback. Recent manufacturing PMI data from China came in unexpectedly strong at 51.2, supporting the outlook for industrial demand. At the same time, falling oil prices, with Brent crude now down near $85 a barrel on news of a potential US/Iran deal, are easing inflation fears.
Gold Technicals, Strategy, And Risk Management
For gold, we are laser-focused on the $4500 per ounce support level, a price driven up over the past two years by historic levels of central bank buying. This level has held firm so far, but traders should be prepared for a significant move if it fails. A break below this support could trigger a drop of around $800 based on technical projections.
Given this setup, we believe traders should consider buying put options on gold or establishing bearish put spreads to position for a potential breakdown below $4500. A failure at this key level, especially while the dollar is weak, would be a powerfully negative signal for the metal. The thin holiday trading volumes could also exaggerate any initial move, making options a prudent way to manage risk.
