Technical Analysis

GOLD Price Analysis – May 24, 2024

By LonghornFX Technical Analysis
May 24, 20244 min

Daily Price Outlook

Despite strong U.S. economic data and a bullish U.S. dollar, the price of Gold (XAU/USD) managed to halt its early-day downward trend and regain traction around the $2,338 level, reaching an intraday high of $2,340.

However, the reason behind this upward trend could be linked to risk-off market sentiment, which was triggered by increasing geopolitical tensions in the Middle East. These tensions have boosted safe-haven assets, including Gold.

As we look forward, gold investors will keep an eye on speeches from Federal Reserve officials. Fed Governor Christopher Waller is set to speak on Friday, and any hint of hawkish sentiment from Fed members could exert downward pressure on gold prices.

Meanwhile, upcoming economic indicators such as US Durable Goods Orders and the Michigan Consumer Sentiment Index will play a significant role in shaping market sentiment.

Geopolitical Tensions in the Middle East Support Gold Prices

The global risk sentiment has been flashing red as tensions in the Middle East remain on the cards, which could support safe-haven gold prices. According to the latest report, over 900,000 Palestinians have been displaced in just two weeks, facing severe shortages of shelter, food, water, and medicine.

Hospitals are struggling without fuel for generators, endangering patients' lives. Israeli forces are advancing in Gaza, besieging critical health facilities. The death toll is increasing, with over 35,800 killed and 80,011 wounded in Gaza. Therefore, the heightens geopolitical uncertainty boosting demand for gold as a safe-haven asset and supporting its price.

US Economic Strength and Fed Outlook Drive Gold Price Downward

On the US front, the robust economic data bolstered the US dollar, hinting at the possibility of higher interest rates, consequently putting pressure on Gold prices. Atlanta Fed President Raphael Bostic highlighted concerns about inflation, suggesting the Fed might delay rate cuts to prevent overheating the economy.

According to the CME FedWatch Tool, the chances of the Fed maintaining rates in September rose from 41.9% to 48.4% on May 23rd, indicating a shift in market expectations towards a hold on rates.

On the data front, US Initial Jobless Claims dropped by 8,000 to 215,000 for the week ending May 18, beating the expected 220,000 and the previous week's 223,000.

Furthermore, the flash US S&P Global Manufacturing PMI rose to 50.9 in May from April's 50.0, while Services PMI climbed to 54.8 from 51.3, both exceeding expectations. Moreover, the US S&P Global Composite PMI surged to 54.4 in May from April's 51.3, surpassing the market's forecast of 51.1 and marking its highest level since April 2022.

Therefore, the robust US economic data, coupled with hints of potential rate hikes, pressured Gold prices lower. Positive jobless claims and PMI figures boosted the dollar, diminishing demand for the precious metal.

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

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) is currently trading at $2338.97, up 0.21%. The technical outlook suggests a bullish trend as the price is positioned above the pivot point of $2326.84. Immediate resistance is observed at $2352.61, with subsequent resistance levels at $2368.37 and $2392.98. On the downside, immediate support is noted at $2307.23, followed by $2291.85 and $2277.62.

The Relative Strength Index (RSI) is currently at 31, indicating that gold is approaching oversold conditions, which could suggest a potential reversal or stabilization around this level. The 50-day Exponential Moving Average (EMA) is at $2386.60, providing significant resistance near the upper levels.

Traders should consider an entry price for buying above $2327, with a take-profit target of $2358 and a stop-loss set at $2307. This strategy leverages the potential for further upside while managing risk. The current market conditions, highlighted by the RSI and EMA, suggest a cautiously optimistic outlook for gold.

In conclusion, the bullish trend is supported by the price positioning above the pivot point and the RSI indicating oversold conditions.

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