Technical Analysis

GOLD Price Analysis – May 22, 2024

By LonghornFX Technical Analysis
May 22, 20244 min

Daily Price Outlook

Gold price (XAU/USD) failed to stop its bearish bias and remained well offered around 2,417 level, hitting the intraday low of 2,426 level. However, the reason for its bearish trend could be attributed to the bullish US dollar, which gained traction on the back of the hawkish stance from Fed officials. The hawkish stance was reinforced after Federal Reserve members cautioned that they need stronger evidence of easing inflation before considering interest rate cuts, suggesting that they will likely maintain higher rates for an extended period.

On the flip side, the losses in the gold price could be short-lived as renewed US-China trade tensions and Middle East geopolitical tensions help the safe-haven gold price to limit its deeper losses.

Federal Reserve Caution Bolsters US Dollar, Dampens Gold Price

On the US front, the broad-based US dollar has been flashing green and edged higher as Federal Reserve members adopted a cautious approach towards easing inflation, indicating a probable continuation of higher interest rates. Fed Governor Christopher Waller wants to see strong data before considering rate cuts, while Atlanta Fed President Raphael Bostic prefers waiting to ensure inflation stays stable before adjusting rates.

Cleveland Fed President Loretta Mester noted that the strong job market eases concerns about keeping rates high. Boston Fed President Susan Collins highlighted that any rate cuts will happen slowly. Experts expect the first cut around September, with two more by year-end.

Therefore, the hawkish stance of the Federal Reserve and the probability of maintaining higher interest rates for longer boosted the US dollar, weighing on the gold price.

Escalating US-China Trade Tensions and Middle East Uncertainty Spark Market Concerns

On the flip side, the long-lasting tensions between the US and China gained momentum on Tuesday as the US announced tariff increases on various Chinese goods, prompting potential retaliatory measures from China, including higher temporary tariff rates on imported cars with large engines.

However, the tensions in the Middle East and the trade disputes between the US and China are creating a lot of uncertainty in the markets. This uncertainty is concerning because it impacts trade between the world's largest economies and makes global markets harder to predict. As a result, gold, which is often seen as a safe investment when things are uncertain, might start to look more appealing. This could lead to an increase in its price and help prevent it from falling too much.

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

GOLD (XAU/USD) - Technical Analysis

Gold is currently trading at $2,413.485, down 0.31%. The 4-hour chart highlights crucial price levels and technical indicators that offer insights into potential market movements. The pivot point stands at $2,419.363, serving as a key reference for traders.

Immediate resistance is noted at $2,434.115, with further resistance levels at $2,441.490 and $2,450.186. These resistance levels will be crucial for the bulls to breach if they aim to push prices higher.

On the downside, immediate support is observed at $2,406.392, followed by $2,397.421 and $2,386.129. These support levels are critical for determining the market's next direction, especially if bearish sentiment prevails.

The Relative Strength Index (RSI) is at 45, indicating neutral market conditions—neither overbought nor oversold. This neutrality suggests that significant market movements could depend on breaking either the support or resistance levels.

Additionally, the 50-day Exponential Moving Average (EMA) stands at $2,408.514, providing a dynamic support level that traders often use to gauge market trends.

The technical outlook for gold suggests cautious optimism. An entry price below $2,417 could present a selling opportunity, targeting $2,400, with a stop loss set at $2,430 to manage risk. Traders should closely monitor these levels and indicators to navigate the market effectively.

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