Technical Analysis

GOLD Price Analysis – May 10, 2024

By LonghornFX Technical Analysis
May 10, 20244 min

Daily Price Outlook

Gold price (XAU/USD) prolonged its bullish bias and continued to gain traction on the back of worsening geopolitical tensions, which boosted the safe-haven assets including gold price. It is currently trading around $2,375.77, hitting the intra-day high of $2,376.49. Moreover, the upticks in the gold price were further bolstered by the weak US labor market data, which has sparked speculation that the Federal Reserve (Fed) may lower interest rates sooner than previously expected.

Weakening Job Market and Speculation of Fed Rate Cuts Drive Interest in Gold

On the US front, recent signs of a weakening job market have revived expectations that the Federal Reserve might need to cut interest rates sooner than expected. Initial Jobless Claims data for early May showed a higher-than-expected rise, following a disappointing Nonfarm Payrolls report for April. This indicates that the US economy is struggling due to high interest rates, prompting speculation of an earlier rate cut by the Fed.

However, some Federal Reserve officials, such as Boston Fed President Susan Collins and Minneapolis Fed President Neel Kashkari, have expressed hawkish views, suggesting that inflation pressures are still too strong to consider lowering rates.

On the data front, the US Bureau of Labor Statistics (BLS) reported that more people filed for unemployment benefits than expected. The latest Initial Jobless Claims for the week ending May 3 climbed to 231,000, exceeding forecasts of 210,000 and higher than the previous week's 209,000. This uptick could indicate a weakening job market, which might influence the Federal Reserve's decisions on interest rates.

As a result, traders are now waiting to see next week's Consumer Price Index (CPI) and Producer Price Index (PPI) reports, which could provide more clues about the Fed's monetary policy direction.

Therefore, the rising unemployment claims and the potential for lower interest rates due to a weaker labor market pushed gold prices higher.

Geopolitical Tensions in the Middle East Boost Gold's Safe-Haven Demand

On the geopolitical front, the previous peace talks between Hamas and Israel in Cairo have collapsed, causing tensions to escalate. Israeli forces are gathering near Rafah, the last major city in Gaza not destroyed. President Biden warned against a full-scale attack, prompting the US to halt weapon shipments to Israel. Despite the warning, reports indicate strikes on a mosque and houses in Rafah, resulting in casualties, including women and children.

Therefore, the escalation of tensions in the Middle East, with the collapse of peace talks between Hamas and Israel and the threat of further conflict in Gaza, has increased demand for gold as a safe-haven asset.

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

GOLD (XAU/USD) - Technical Analysis

In today's trading session, Gold (XAU/USD) has observed a modest increase, currently priced at $2357.13, marking a 0.23% rise. The precious metal continues to exhibit strength as it trades well above the pivotal $2345.71 level, driven by persistent investor interest amid a fluctuating market landscape.

The immediate pivot point for Gold stands at $2345.71. Resistance levels are distinctly marked, with the first at $2372.66, followed by higher resistances at $2393.38 and $2416.87, which could serve as future targets should bullish momentum persist.

On the downside, the initial support is found at $2327.06, with subsequent supports at $2306.33 and $2283.88, crucial for buffering any potential retracements.

The Relative Strength Index (RSI) is currently high at 71, suggesting that Gold might be approaching overbought conditions, potentially signaling a forthcoming consolidation or pullback.

Meanwhile, the 50-Day Exponential Moving Average (EMA) stands at $2313.08, reinforcing the ongoing bullish sentiment as prices remain above this key moving average.

Given the current technical setup, a strategic approach would be to buy Gold if it ascends above $2353, aiming for a take-profit at $2372, while setting a stop loss at $2340 to mitigate potential downside risks.

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