Technical Analysis

GOLD Price Analysis – May 21, 2024

By LonghornFX Technical Analysis
May 21, 20244 min

Daily Price Outlook

During the European trading session on Tuesday, the Gold price (XAU/USD) failed to stop its early downward rally and remained under pressure around the 2,416 level, hitting the intraday low of 2,416 level.

The reason for its downward rally could be attributed to the bullish US dollar, which gained traction despite hopes for Fed rate cuts and a risk-on market sentiment.

This is because investors were waiting for more clues about US interest rates after cautious comments from Federal Reserve officials. Conversely, the ongoing geopolitical tensions were seen as key factors that capped further losses in the Gold price.

In the coming days, traders will be paying close attention to statements from several Federal Reserve officials, such as Waller, Williams, Barr, Bostic, Collins, and Mester.

In the meantime, the release of the FOMC Minutes is anticipated to be a significant event as hawkish remarks from these officials could bolster the US dollar, thereby exerting downward pressure on the price of Gold.

Federal Reserve Caution and US Dollar Strength Weighing on Gold Amid Rate Cut Speculation

Despite the ongoing hopes for Fed rate cuts and a risk-on market sentiment, the broad-based US dollar remained bullish on the day. Investors were curious about the Federal Reserve's plans for interest rates. Despite signs of cooling inflation, Fed officials were cautious.

Atlanta Fed President Raphael Bostic emphasized the importance of confidence in hitting the 2% inflation target.

Fed Vice Chair Philip Jefferson expressed uncertainty about inflation hitting the target, suggesting continued caution. Markets are pricing in potential Fed rate cuts this year, with a 76% chance of a 25 basis point cut in September. This comes amid ongoing debates about the pace of economic recovery and inflation.

Therefore, the cautious approach of Federal Reserve officials and uncertainty about inflation and potential rate cuts likely boosted the US dollar slightly, which may have pushed down Gold prices.

Escalating Geopolitical Tensions in Gaza Supporting Gold Prices

On the negative side, Israeli attacks continue on Gaza, with recent raids in Jenin causing at least five deaths. The ICC is seeking arrest warrants for Israel's PM, Defence Minister, and three Hamas leaders. UN reports indicate over 900,000 forcibly displaced in Gaza.

Recent Israeli air strikes killed 18 in Jabalia and Beit Lahiya. The death toll in Gaza has reached 35,562. This escalating tension could support safe-haven assets like Gold to limit its downward losses.

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

GOLD (XAU/USD) - Technical Analysis

Gold prices are currently trading at $2419.615, down 0.57% in the 4-hour timeframe. The technical landscape reveals pivotal price levels that traders should monitor closely. The pivot point is set at $2409.07, which serves as a key indicator for potential price movements.

Immediate resistance is identified at $2429.22, followed by $2440.25 and $2450.19. These levels suggest potential barriers that could hinder upward momentum.

Conversely, immediate support is located at $2396.18, with subsequent support levels at $2384.00 and $2375.09. These supports are crucial for preventing further declines in gold prices.

The Relative Strength Index (RSI) stands at 53, indicating a neutral position. This suggests that gold is neither overbought nor oversold, leaving room for price fluctuations based on market dynamics.

The 50-day Exponential Moving Average (EMA) is calculated at $2399.94. Prices trading above this level typically signal a bullish trend, while those below may indicate a bearish outlook. Given the current price, gold is trading just above its 50-day EMA, suggesting a tentative bullish bias.

Conclusion: The recommended entry strategy is to buy above $2410, with a take profit target at $2430 and a stop loss at $2400. This strategy capitalizes on the bullish trend while mitigating risks through a well-placed stop loss.

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