GOLD Price Analysis – May 25, 2023

Daily Price Outlook

As we approach Thursday’s European session, the price of gold (XAU/USD) is wavering, struggling to determine a clear path as market players juggle positions near an important short-term support line, roughly at $1,955.

This gold price behavior mirrors the market’s apprehension amid mixed information related to US debt ceiling negotiations and the actions of the US Federal Reserve (Fed). The cautious sentiment ahead of a barrage of mid-tier US data could also impact XAU/USD traders.

Despite signs of progress in recent negotiation sessions, US policymakers’ failure to finalize a debt ceiling extension deal, coupled with an impending extended weekend for the House Representatives, is causing heightened concerns about a potential US default. Major global rating agencies, such as Fitch and Moody’s, have expressed concerns about the US’s credit rating status, which the US Treasury Department has acknowledged.

Elsewhere, minutes from the latest Federal Open Market Committee (FOMC) meeting revealed that there was division among decision-makers over the recent 0.25% interest rate hike from the US central bank. This discrepancy casts doubt on market expectations for a similar move in June.

Atlanta Fed President Raphael Bostic commented that we’re just starting the challenging part of managing inflation. Echoing his sentiments, Federal Reserve Governor Christopher Waller emphasized his lack of support for pausing rate hikes unless compelling evidence shows inflation is moving toward the 2% target.

Despite record interbank repo turnovers and expectations for further monetary easing from China, geopolitical tensions could restrict gold price movements.

Preliminary data from the CME Group indicates another drop in open interest in gold futures markets on Wednesday, down by about 2.3K contracts. In contrast, trading volume increased for the second consecutive session, up by approximately 29.6K contracts.

Wednesday’s sharp drop in gold prices, paired with reduced open interest, suggests that a prolonged decline is currently unlikely. On the downside, there appears to be considerable resistance around $1950 per troy ounce.

GOLD Price Chart – Source: Tradingview

GOLD – Technical Outlook

Gold is currently trading around the $1955 level, with a bearish sentiment prevailing in the market. On the four-hour timeframe, a descending candle pattern is forming, indicating a strong selling trend in gold.

The immediate resistance for gold is expected around the $1960 level, while support can be found around the $1952 level. A breach of the $1952 level may lead to a further decline towards the next support levels at $1944 and $1936.

Conversely, if gold manages to hold above the $1950 level, it could trigger a bullish bounce. A break above the $1960 to $1968 range may indicate a potential bullish correction.