Technical Analysis

GOLD Price Analysis – May 08, 2024

By LonghornFX Technical Analysis
May 8, 20244 min

Daily Price Outlook

Gold price (XAU/USD) prolonged its bullish bias and remained well bid around the $2,315 level, reaching an intraday high of $2,321.43. However, the reason for its upward trend could be linked to risk-off mood in the market due to the increasing geopolitical tensions and uncertainty in the market. This boosted safe-haven assets including the Gold price. However, the increasing geopolitical tensions in Gaza, driven by Israeli military strikes despite ceasefire talks, can boost safe-haven assets like gold as investors seek stability amidst uncertainty, raising gold prices.

Hawkish Fed Remarks Could Weaken Gold Prices Amid Rate Cut Uncertainty

Despite disappointing employment data, the likelihood of interest rate cuts in 2024 is diminishing due to hawkish statements from Federal Reserve officials. This could lead to a decline in gold prices as rate cuts typically support precious metal values. However, upcoming speeches from Fed policymakers Philip Jefferson, Susan Collins, and Lisa Cook might reinforce a stronger US dollar, exerting downward pressure on gold.

Neel Kashkari, the president of the Minneapolis Federal Reserve, has indicated that the central bank might consider cutting interest rates if inflation begins to ease. This reflects a more flexible approach to monetary policy, where rate cuts are used to support economic growth when inflation is under control.

Thomas Barkin, the president of the Richmond Federal Reserve, holds a different view, suggesting that the current interest rates are adequate to manage inflation. This implies that the Fed might not need to make further adjustments to interest rates to keep inflation in check.

Financial markets are anticipating about 50 basis points (0.5%) of interest rate cuts from the Fed in 2024, with a strong likelihood of a 25 basis point (0.25%) rate cut in September, according to the CME's FedWatch Tool, which tracks market expectations for Fed policy. This suggests that traders and investors are already pricing in lower rates for 2024.

Meanwhile, the University of Michigan's Consumer Sentiment Index is an important gauge of consumer confidence in the US economy. It's expected to drop from 77.2 in April to 76.0 in May, and this forecasted decline will be closely watched by gold traders. A drop in consumer sentiment could signal economic concerns, potentially affecting gold prices and other safe-haven assets.

Hence, the hawkish remarks from Federal Reserve officials dampen hopes for interest rate cuts in 2024, strengthening the US dollar and leading to a decline in gold prices.

Geopolitical Tensions in Gaza Drive Safe-Haven Demand

On the geopolitical front, renewed conflict in Gaza has boosted the safe-haven demand due to heightened uncertainty. Israeli troops launched strikes on Gaza's southernmost city, despite a ceasefire proposal agreed upon by Hamas on Monday. Israel indicated that the ceasefire conditions didn't meet its requirements, leading to continued tensions. Hence, the ongoing conflict in Gaza has triggered safe-haven demand, leading to increased uncertainty. This has likely boosted the price of gold, as investors seek stability amidst rising geopolitical tensions.

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

GOLD (XAU/USD) - Technical Analysis

In today's trading session, Gold (XAU/USD) posted a slight increase, nudging up by 0.04% to $2317.31, signaling a stabilization within a tight trading range. The technical structure suggests that the pivot point at $2330 remains a crucial juncture for determining Gold’s short-term trajectory.

Resistance levels have been clearly delineated at $2349, $2370, and $2393. These thresholds represent potential selling pressure points that could cap upward movements should gold attempt to extend gains.

Conversely, the support structure begins notably lower at $2296, followed by $2277 and $2260. These levels could act as cushions if the price retreats, offering potential buying opportunities for traders looking to capitalize on dips.

Technical indicators, including the Relative Strength Index (RSI) at 52, hint at a neutral market sentiment, neither overbought nor oversold, suggesting potential for both upward and downward movements.

The 50-day Exponential Moving Average (EMA) at $2315 provides near support, reinforcing the $2330 pivot level as a critical threshold. If prices sustain below this pivot, it could trigger a bearish trend towards the lower support levels.

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