Technical Analysis

GOLD Price Analysis – June 05, 2023

By LonghornFX Technical Analysis
Jun 5, 20233 min
Signal 2023 05 25 122622 002

Daily Price Outlook

Gold price failed to stop its downward rally and experienced a continuous decline for the second consecutive day on Monday, ultimately reaching just above the $1,940 level. However, the downward trend can be attributed to the ongoing uncertainty surrounding the Federal Reserve’s upcoming decision on interest rates.

It is worth noting that the recent release of better-than-expected U.S. nonfarm payroll data for May has increased the possibility of the Fed adopting a more aggressive stance to control high inflation.

However, some Fed officials have suggested that interest rates might stay relatively high, which negatively affects assets like gold. Besides, the strength of the US dollar, driven by the expectation of higher interest rates, has also contributed to the downward pressure on gold prices.

The Impact of the US Dollar’s Rebound on Gold Prices: A Dollar-Denominated Relationship

The recent rebound of the US Dollar has adversely affected the price of Gold. Gold, being generally denominated in US Dollars, tends to decline when the US Dollar strengthens.

The strength of the US Dollar can be attributed to the release of mixed employment data from the United States. In May, the Nonfarm Payrolls report showed a higher-than-expected addition of 339,000 jobs, signaling potential continuation of the Federal Reserve’s hawkish stance to combat high inflation.

As a result, US Treasury bond yields are increasing, further bolstering the strength of the US Dollar and exerting downward pressure on the price of Gold.

Gold Prices Under Pressure as Risk-On Sentiment Prevails

The ongoing risk-on market sentiment continues to exert downward pressure on gold prices. Investors are displaying a preference for riskier assets, which diminishes the appeal of safe-haven assets such as XAU/USD. As a result, the shift in sentiment has weakened the demand for gold, thereby keeping its price under pressure.

Investors are currently optimistic about the US government’s prospects of passing legislation to raise the debt ceiling, effectively averting a potential default. Additionally, an upswing in services activity in China, as indicated by a recent survey, has contributed to positive sentiment in equity markets. These factors could limit gains in gold prices, warranting caution among aggressive bullish traders.

Traders are closely monitoring the impact of the US ISM Services PMI and bond yields on the US dollar and gold. The prevailing risk sentiment will also play a pivotal role in determining short-term trading opportunities for XAU/USD.

GOLD Price Chart – Source: Tradingview

GOLD – Technical Outlook

Gold experienced a significant decline on Monday, with prices hovering around the $1943 level. On the four-hour chart, gold breached the support level of the double bottom pattern at $1953, which is now anticipated to act as a substantial resistance level for future price movements.

Moreover, the 50-day exponential moving average is serving as resistance around the $1953 mark, further indicating the potential continuation of the downtrend. Potential support can be found around the $1932 level.

The presence of the 50-day exponential moving average suggests selling pressure, while the RSI and MACD indicators indicate oversold conditions. As a result, the $1953 level is expected to function as a pivotal point for gold prices today, with traders possibly considering selling opportunities at this level.

However, if gold manages to break above the $1953 level, the next resistance levels to monitor are approximately $1960 or $1975.



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