Technical Analysis

GOLD Price Analysis – May 14, 2024

By LonghornFX Technical Analysis
May 14, 20244 min

Daily Price Outlook

Despite the bullish US dollar and hawkish Fed stance regarding interest rates, the safe-haven gold maintained its upward trend and edged higher around the 2,345.73 level, hitting an intra-day high of 2,348.28.

The reason for its upward trend can be attributed to increasing geopolitical tensions, which continue to stoke demand for the safe-haven asset.

Meanwhile, Gita Gopinath from the IMF warned that countries are reconsidering their trade partners, which could lead to a retreat from global trade rules. Western sanctions on nations like Russia and Iran contribute to this trend.

As a result, investors and central banks are increasingly turning to gold as a safe asset, potentially driving up its price.

Furthermore, the decision by BRICS nations to use less of the US dollar in international trade has increased the demand for gold as an alternative. This shift, along with non-Western central banks increasing their gold reserves, is reducing reliance on the US dollar.

US Dollar Strength and Potential Impact on Gold Prices

On the US front, the broad-based US dollar continued its upward trend, staying bullish due to cautious remarks from Federal Reserve officials about keeping interest rates high to tackle persistent inflation.

Fed Vice Chair Philip Jefferson emphasized the need to maintain current rates until signs of inflation easing appear.

Investors are closely monitoring the Producer Price Index (PPI) as it could impact future market trends. Consumer sentiment surveys suggest US consumers anticipate inflation to reach 3.3% in the coming year.

While Minneapolis Fed President Neel Kashkari expressed concerns about monetary policy restrictiveness, rate hikes are still a possibility. San Francisco Fed President Mary Daly emphasized the necessity of maintaining a prolonged restrictive policy to achieve the Federal Reserve's inflation targets.

On the data front, consumer sentiment in the US took a hit in May, dropping to 67.4 from April's 77.2, the lowest in six months, and below market expectations. Meanwhile, consumer inflation expectations rose slightly to 3.1%, hitting a six-month high.

Looking ahead, the US Producer Price Index (PPI) for April is expected to rise by 2.2% compared to last year, with Core PPI likely increasing by 2.4%. Additionally, Consumer Price Index (CPI) inflation is forecasted to ease to 3.4% from the previous 3.5%, while Core CPI inflation is expected to drop to 3.6% from March's 3.8%.

Therefore, the bullish US dollar, driven by cautious Fed remarks on inflation, pressures gold prices as investors eye PPI data for economic cues.

Geopolitical Tension in the Middle East and Potential Impact on Gold Prices

On the geopolitical front, tension in the Middle East intensified as the Israeli military carried out multiple deadly attacks across the Gaza Strip. It should be noted that these attacks resulted in civilian casualties, including children.

The UN chief condemned the killing of a foreign staff member in Israel's actions and called for a full investigation.

Israeli forces also ordered the evacuation of medical staff from Rafah's Kuwaiti Hospital, raising concerns about the collapse of Gaza's healthcare system. However, the death toll from Israeli attacks on Gaza since October 7 has reached 35,173, with thousands wounded.

Therefore, the heightened tension in the Middle East following Israeli military attacks in Gaza may increase uncertainty, potentially driving up gold prices. Investors often turn to gold as a safe-haven asset during geopolitical instability, which could lead to increased demand and upward pressure on its price.

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

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) is trading at $2339.040, up 0.31%, reflecting a slight recovery from recent dips. The 4-hour chart indicates a pivot point at $2333.49. Immediate resistance levels are set at $2356.91, $2378.70, and $2401.14, while support levels are identified at $2307.47, $2286.32, and $2267.78.

Technical indicators provide further insight into the current market conditions. The Relative Strength Index (RSI) is neutral at 50, indicating neither overbought nor oversold conditions.

The 50-day Exponential Moving Average (EMA) stands at $2324.65, suggesting a support level slightly below the current price, which can act as a cushion in the event of downward pressure.

Given the current technical setup, the strategy involves an entry price for selling below $2332, with a take-profit target at $2355 and a stop loss at $2320. This approach considers the potential for gold to face resistance at higher levels while acknowledging the support provided by the 50 EMA.

A break above the immediate resistance at $2356.91 could indicate further bullish momentum, pushing prices toward the next resistance levels of $2378.70 and $2401.14.

Conversely, if gold falls below the pivot point of $2333.49, the immediate support at $2307.47 and subsequent levels at $2286.32 and $2267.78 will be crucial to watch. Overall, gold's outlook remains cautiously bullish above the pivot point of $2333.49.

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