Technical Analysis

GOLD Price Analysis – May 09, 2024

By LonghornFX Technical Analysis
May 9, 20244 min

Daily Price Outlook

Despite the hawkish comments from the US Federal Reserve and stronger US dollar, the Gold price (XAU/USD) prolonged its upward trend and remained well bid around the 2,309.73 level and hitting an intraday high of 2,319.80. However, the upward trend in gold could be associated with a risk-averse environment and uncertainties surrounding geopolitical tensions in the Middle East, which are not showing any signs of slowing down. This boost safe-haven assets like gold. On the other hand, the stronger US dollar, backed by hawkish comments from the US Federal Reserve (Fed), could cap gains in the gold price.

Impact of Federal Reserve Outlook and Consumer Sentiment on Gold Prices

On the US front, the US dollar has been gaining positive traction due to expectations that the Federal Reserve will maintain high interest rates for a while. This expectation is fueled by statements from influential Fed officials like Susan Collins from Boston, who said it could take longer to reduce inflation to the target of 2%. Similarly, New York's John Williams and Minneapolis's Neel Kashkari have noted that interest rates might remain elevated for an extended time.

Consequently, investors now estimate only a 55% chance of a quarter-point rate cut by the Fed in September, a significant decrease from the 85% likelihood reported before last week's employment data.

Meanwhile, the University of Michigan's Consumer Sentiment Index is forecasted to drop from 77.2 in April to 76.0 in May. This index measures consumer confidence in the economy. A decline indicates that people might be slightly less optimistic about things like job prospects and their financial situation. This could have some influence on the Federal Reserve's decisions regarding interest rates.

Therefore, the stronger US dollar and reduced consumer sentiment might put downward pressure on gold prices, as a robust dollar makes gold less appealing to investors, while lower consumer confidence could indicate decreased demand for safe-haven assets like gold.

Geopolitical Tensions in the Middle East and Their Impact on Gold Prices

On the geopolitical front, the ongoing tensions in the Middle East continue despite Hamas showing willingness to agree to a draft ceasefire agreement, which Israel rejected because it didn't meet the demands of Israeli Prime Minister Benjamin Netanyahu. Whereas, Israel's closure of the Rafah border crossing limits humanitarian aid to Gaza. Meanwhile, President Biden's refusal to provide offensive weapons to Israel for Rafah attacks indicates a significant shift in his stance on Israeli military actions.

It should be noted that President Biden drew attention to civilian casualties from Israeli bombings in Gaza as the ongoing conflict has displaced tens of thousands of Palestinians, resulting in thousands of deaths and injuries in Gaza. Hence, the uncertainty from the conflict could boost gold's safe-haven appeal, driving up prices.

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

GOLD (XAU/USD) - Technical Analysis

As of today, Gold's price is marked at $2,314.645, reflecting a rise of 0.29%. The commodity's movements suggest a stable upward trend, hovering slightly above the 50-Day Exponential Moving Average (EMA) of $2,313. This positioning of the price relative to the EMA indicates mild bullish signals within the market. The Relative Strength Index (RSI) stands at a neutral 50, suggesting that Gold is neither overbought nor oversold at the current level, providing room for potential price swings in either direction.

The technical chart shows a current pivot point at $2,332, which serves as immediate resistance. Should Gold breach this level, it would face further resistance at $2,349 and $2,366. These levels could act as key barriers before any significant upward continuation is confirmed. Conversely, if the price retreats, immediate support is found at $2,292. Subsequent support levels at $2,277 and $2,260 will be critical in preventing further declines and stabilizing the price.

Given the current setup and market indicators, a conservative trading strategy would be to enter a long position if Gold rises above $2,310. For those taking this position, a reasonable target for taking profits could be set at $2,325, with a stop loss at $2,300 to protect against unexpected downturns.

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