Technical Analysis

Gold Price Analysis – May 07, 2024

By LonghornFX Technical Analysis
May 7, 20244 min

Daily Price Outlook

Gold (XAU/USD) continued its downward trend and remained weak around the $1,314 level, reaching an intraday low of $1,311.85. This decline can be attributed to the strengthening of the US dollar, which gained momentum despite disappointing US jobs data and rising speculation about potential rate cuts by the Federal Reserve in the coming months.

However, ongoing political tensions in the Middle East could boost safe-haven demand and potentially limit further losses in the gold price.

US Dollar Strength and Fed Rate Cut Expectations Weigh on Gold Prices

On the US front, the rising demand for the US dollar is contributing to the downward trend in gold prices. However, the latest US Nonfarm Payrolls report has increased expectations that the Federal Reserve might cut interest rates later this year.

Richmond Fed President Thomas Barkin mentioned that the current interest rate level could be enough to cool the economy, while New York Fed President John Williams confirmed that rate cuts are likely at some point.

Markets are anticipating rate cuts of about 46 basis points by the end of 2024, with the first cut possibly happening in September or November. The US jobs data showed that job growth slowed more than expected in April, with annual wage growth dipping below 4.0% for the first time in nearly three years.

Therefore, the combination of a stronger US Dollar and expectations of Fed rate cuts later this year is putting downward pressure on gold prices, despite weaker job growth and falling wage increases.

Middle East Tensions May Boost Gold's Safe-Haven Demand

On the geopolitical front, ongoing tensions in the Middle East could drive safe-haven demand, benefiting gold prices. Although Hamas has accepted an Egyptian-Qatari ceasefire plan, Israel rejected the deal because it did not meet its core demands.

As a result, Israel continued its military operations in southern Gaza, specifically in Rafah. However, Israel has indicated that it is open to further negotiations. The uncertainty surrounding these developments may increase demand for safe-haven assets like gold, which could limit further price declines.

Hence, the ongoing tensions in the Middle East, with Israel's rejection of a ceasefire deal and continued military operations, may elevate safe-haven demand for gold, offsetting further price declines.

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

GOLD (XAU/USD) - Technical Analysis

Today's technical analysis of gold reveals a minor retreat in its price to $2316.40, reflecting a 0.24% decrease. Currently positioned below the crucial pivot point of $2330, gold's price trajectory hints at potential further declines unless it manages to climb above this key level soon.

The immediate resistance facing gold is at $2349, with subsequent levels at $2370 and $2393, which will test the resilience of any bullish momentum.

On the support side, the first significant level is at $2296. If this threshold fails to hold, further supports at $2277 and $2260 will come into play. These levels are critical for traders to watch, as they could provide a floor, stabilizing prices or potentially triggering a rebound if approached.

The Relative Strength Index (RSI) stands at 51, indicating a neutral market sentiment that does not lean heavily towards overbought or oversold conditions.

This suggests that gold's price could sway in either direction, heavily influenced by external market drivers or changes in investor sentiment. Similarly, the 50-Day Exponential Moving Average (EMA) at $2317 supports the pivot point's significance, indicating that gold's current trading range is at a critical juncture.

Given these observations, traders might consider a cautious approach. The proximity of the current price to the pivot point and EMA suggests that gold is in a delicate balance, and any significant market news could tip this balance, leading to notable price movements.

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