Technical Analysis

GOLD Price Analysis – May 17, 2024

By LonghornFX Technical Analysis
May 17, 20244 min

Daily Price Outlook

Gold price (XAU/USD) has prolonged its winning streak and remained well bid around $2,383 level and hit an intraday high of around $2,387. However, this upward movement can be attributed to several factors, including ongoing geopolitical tension, which increased demand for precious metals like gold as a safe-haven asset.

In addition to this, the previously released softer-than-expected US inflation data in April triggered hope for rate cuts from the US Federal Reserve (Fed). This was seen as another key factor that boosting the gold price.

Looking ahead, traders are currently reluctant to make strong moves in the market because there isn't much significant economic data being released in the US at the moment.

Instead, they are paying close attention to speeches by Federal Reserve officials, such as Kashkari, Waller, and Daly, to gain potential insights into the future direction of the Fed's monetary policy.

Cautious Fed Comments and Mixed Economic Data Support Gold Prices Amid Uncertainty

On the US front, the broad-based US dollar lost some of its traction and remained under pressure on the back of softer-than-expected inflation data in April, which raised hopes for Federal Reserve (Fed) rate cuts and boosted precious metals like gold.

In contrast to the earlier hopes for rate cuts, recent comments from Federal Reserve officials suggest a more cautious approach, indicating they may not rush to lower interest rates. Atlanta Fed President Raphael Bostic acknowledged signs of cooling inflation but stated that he wants to see more data before making any decisions.

In the meantime, Cleveland Fed President Loretta Mester believes the current policy is appropriate as it is. Richmond Fed President Tom Barkin emphasized the need to keep borrowing costs high for a longer period.

Despite these cautious stances, financial markets are predicting a 75% chance of a Fed rate cut in September and expect full rate cuts by the end of the year.

On the data front, US weekly Initial Jobless Claims climbed to 222K for the week ending May 11, surpassing the 220K estimate provided by the US Bureau of Labor Statistics (BLS).

Meanwhile, Housing Starts saw a 5.7% month-over-month increase in April, reaching 1.36 million, but Building Permits fell by 3% month-over-month to 1.44 million in the same month.

Therefore, the mixed economic data and cautious Fed stance have created uncertainty, supporting gold prices as investors seek safe-haven assets amid concerns over the pace of the economic recovery.

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

GOLD (XAU/USD) - Technical Analysis

Gold is trading at $2,385.460, up 0.36% for the day, maintaining a bullish trajectory. The 4-hour chart shows a pivot point at $2,376.154, which serves as a critical support level. Immediate resistance is observed at $2,395.702, followed by $2,406.246 and $2,417.292.

These levels are key indicators for potential upward momentum, with the immediate resistance acting as a crucial barrier for further gains.

On the downside, immediate support is at $2,360.833, with additional support levels at $2,347.332 and $2,331.560. These support levels are vital for maintaining the bullish outlook, as a break below them could indicate a shift in market sentiment.

The 50-day Exponential Moving Average (EMA) at $2,348.267 provides further support, aligning closely with the current price and reinforcing the bullish trend.

The Relative Strength Index (RSI) is currently at 63, suggesting moderate bullish momentum. An RSI above 50 generally indicates an upward trend, but a level of 63 also hints at the approach of overbought conditions, warranting cautious optimism.

The formation of a bullish trend is supported by a series of higher highs and higher lows, along with strong buying interest above the pivot point of $2,376.154. However, traders should be vigilant for any signs of reversal, especially if the price fails to break through the immediate resistance levels.

In conclusion, the technical outlook for gold remains bullish above the pivot point of $2,376.154. An entry price for buying is recommended above $2,375, with a take profit target at $2,395 and a stop loss at $2,360. This strategy balances the potential for further gains against the risk of a downward correction.

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