Technical Analysis

GOLD Price Analysis – May 16, 2023

By LonghornFX Technical Analysis
May 16, 20234 min

Daily Price Outlook

The price of gold failed to maintain its upward rally and experienced a slight drop on Tuesday. This decline can be attributed to signals from Federal Reserve officials indicating the potential for further interest rate hikes due to high inflation and a strong labor market.

It's important to note that gold loses its appeal when US interest rates rise because it does not generate interest or dividends. As a result, investors tend to sell gold and seek assets that offer higher potential returns, leading to bearish pressure on gold prices.

On a positive note, gold did see some gains in the previous trading session. These gains were driven by ongoing economic uncertainty, particularly concerns about a potential recession or banking crisis. During such uncertain times, investors often turn to gold as a safe-haven asset, increasing its demand and increasing its price.

However, these upward movements were short-lived as traders approached the market cautiously in anticipation of key economic readings from the United States, starting with retail sales and industrial production, which were scheduled for later in the day.

Looking ahead, the upcoming speeches by Federal Reserve officials, including Chair Jerome Powell on Friday, are expected to impact the price of gold. Investors closely follow these statements as they provide insights into the future direction of monetary policy and interest rates.

Global Economic Slowdown Drive Up Gold Prices

In addition, worries surrounding a global economic slowdown have had a significant impact on bolstering the price of gold as a safe-haven asset.

These concerns were further heightened by the recent preliminary reading from the University of Michigan, which revealed that consumer sentiment in the United States hit a six-month low in May.

The survey notably indicated that consumers anticipate an annual inflation rate of 3.2% over the next five years, marking the highest level since 2011.

This scenario is likely to exert pressure on the Federal Reserve to maintain higher interest rates for an extended duration in order to address inflationary pressures.

US Dollar Retreats from Five-Week High Amid Debt Ceiling Concerns, Boosting Gold Prices

The broad-based US Dollar experienced a retreat from its five-week high and declined on Monday due to concerns surrounding the standoff over the US debt ceiling.

This decline in the US Dollar ultimately led to a boost in the price of gold. President Joe Biden has expressed his intention to hold discussions with congressional leaders in order to address the issue of raising the debt limit and prevent a potential default.

Consequently, some investors have decided to take profits on their US Dollar positions following the recent strong gains in the currency. The decline in the US Dollar was therefore viewed as another significant factor that capped the gains in gold prices.

 GOLD Price Chart - Source: Tradingview

GOLD – Technical Outlook

Gold prices have held steady around the $2016.95 mark, displaying little change since yesterday. The bearish trend remains intact, suggesting a potential correctional target of $1977.25.

Significantly, the Stochastic indicator indicates clear negative signals, indicating a possible continuation of the anticipated decline. The presence of the EMA50 indicator reinforces this negative pressure.

However, it is worth noting that a breakthrough above the key levels of $2016.95 and $2027.20 could invalidate the bearish scenario and potentially trigger a renewed attempt to regain the main bullish trend.

For today's trading session, market participants should anticipate a trading range between the support level of $1995.00 and the resistance level of $2027.00. Based on current market conditions, the forecast suggests a bearish trend for the day.


    * EUR/USD Price Analysis – May 16, 2023

    * AUD/USD Price Analysis – May 16, 2023

    * GOLD Price Analysis – May 15, 2023



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