Technical Analysis

GOLD Price Analysis – May 23, 2023

By LonghornFX Technical Analysis
May 23, 20233 min

Daily Price Outlook

Gold (XAU/USD) price failed to stop its downward rally and dropped further around 1,956 on Tuesday. Gold Price remains on the back foot around the intraday low of nearly $1,955 as it drops for the second consecutive day.

However, the reason for its decline can be associated with the warnings from Federal Reserve (Fed) policymakers about potential future interest rate hikes as a means to address persistent inflation in the United States.

These warnings have created a negative impact on the Gold price, causing it to decrease for the second consecutive day. Moreover, the declines in gold prices were further bolstered by concerns over escalating tensions between the US and China, as well as uncertainties surrounding China's economic growth.

As we all are well aware that China is one of the largest consumers of gold globally, and any negative developments affecting the country tend to have a substantial impact on the price of the precious metal.

Meanwhile, investors maintain confidence in US President Joe Biden's ability to secure an increase in the US debt ceiling. However, Monday's meeting between President Biden and House of Representatives Kevin McCarthy ended without reaching an agreement, though it was considered productive. This development has the potential to impact gold by introducing uncertainty and volatility into the market.

Impact of US Debt Ceiling Negotiations and Rate Hike Expectations on the US Dollar and Gold

The broad-based US Dollar prolonged its bullish rally and currently trading around 103.30. Despite the failure of US President Joe Biden and House Speaker Kevin McCarthy to reach a deal on the debt ceiling during their latest negotiations., the greenback has been gaining ground. This can be attributed to the policymakers' optimism about reaching an agreement to prevent a US default.

Furthermore, the increasing probability of a 0.25% rate hike by the Federal Reserve in June was seen as another key factor that has been supporting the US Dollar's rally. As a result, this puts downward pressure on the price of gold.

 GOLD Price Chart - Source: Tradingview

GOLD – Technical Outlook

Gold is currently experiencing a strong bearish movement around the 1960 level. As observed on the four-hour timeframe, it aligns closely with our previous forecast, indicating a downward trend.

The next level of support is expected to be around 1955, with a potential target of 1952. On the other hand, resistance for gold is likely to be encountered at the 1968 level. If the price manages to break above this level, it could potentially reach 1975 or 1980.

The 50-day exponential moving average suggests a bearish sentiment, further supported by the formation of consistent bearish candles on the four-hour timeframe.

Additionally, the presence of three consecutive black rose candles indicates a strong selling pressure. Considering these factors, it is advisable to look for short positions below the 1965 level, with a target set at 1955 or 1951.


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