Technical Analysis

GOLD Price Analysis – June 4, 2024

By LonghornFX Technical Analysis
Jun 4, 20244 min

Daily Price Outlook

Gold price (XAU/USD) failed to reverse its bearish trend and remained well supported around 2,333, hitting an intra-day low of 2,326. However, the cause for its downward trend can be linked to the risk-on market mood, which weakened Gold's safe-haven appeal.

However, the risk-on-market mood was being driven by the lower tensions in the Israel-Hamas conflict in the Middle East.

In contrast to this, the US dollar is under pressure due to rising projections of interest rate cuts from the Federal Reserve (Fed) later this year, as well as dismal US macro data on Monday. As a result, the bearish US dollar was considered as a crucial factor in limiting gold price losses.

Rate Cut Expectations & Bearish US Dollar Impact on Gold Prices

On the US front, the bond-based US dollar tried to recoup its losses but failed, remaining under pressure due to signs of lowering inflation and weak economic growth, which have heightened expectations of a rate cut this year from the Federal Reserve.

This perspective is supported by the unexpected decrease in the ISM Manufacturing PMI, which fell to 48.7 in May from 49.2 in April.

According to the CME FedWatch Tool, there is a more than 60% possibility that the Fed will cut interest rates by 25 basis points in September, which is why traders are increasingly betting on the move. This may help to limit losses in Gold prices by causing the US Dollar to fall to its lowest position since April 10.

According to data issued by the US Bureau of Economic Analysis, the Personal Consumption Expenditures (PCE) Price Index remained unchanged at 2.7% year on year, with the core gauge rising to 2.8%, in line with expectations.

Meanwhile, the biggest decline in new goods orders in nearly two years also impacted the US Institute for Supply Management's (ISM) Manufacturing PMI, which fell from 49.2 to 48.7 in May.

Eased Israel-Hamas Tensions & Its Impact on Gold Safe-Haven Appeal

Geopolitically, the appealing nature of silver as a safe haven has reduced as tensions between Israel and Hamas in the Middle East have eased. According to a Reuters story published on Monday, the US is asking for UN Security Council support for President Joe Biden's cease-fire proposal to end hostilities between Israel and Hamas militants in Gaza.

President Biden's suggestion for a ceasefire in Gaza was hesitantly accepted by Israeli Prime Minister Benjamin Netanyahu's cabinet on Sunday, suggesting a possible de-escalation in the region and influencing Gold long-standing safe-haven status in the financial markets.

GOLD Price Chart - Source: Tradingview
GOLD Price Chart - Source: Tradingview

GOLD (XAU/USD) - Technical Analysis

Gold is trading at $2,344.20, down 0.09% in the 4-hour timeframe. The pivot point at $2,352.26 serves as a critical level, dictating potential price movements. Immediate resistance levels are set at $2,364.03, $2,373.25, and $2,384.37. On the downside, immediate support is identified at $2,329.94, followed by $2,315.41 and $2,304.52.

Technical indicators suggest a cautious outlook. The Relative Strength Index (RSI) is at 50, indicating neutral market sentiment. The 50-day Exponential Moving Average (EMA) is positioned at $2,343.92, aligning closely with the current price, suggesting potential support around this level.

Given the current technical setup, the recommended strategy is to sell below $2,352, with a take-profit target at $2,330 and a stop loss at $2,365. The bearish sentiment is underscored by the market's inability to maintain levels above the pivot point, signaling potential further downside.

In conclusion, the outlook for gold remains bearish below $2,352, with immediate resistance levels offering potential barriers to upward movements. However, a break above this level could shift the bias towards a more bullish trend, warranting close monitoring of price action around these key levels.

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