Technical Analysis

GOLD Price Analysis – May 29, 2024

By LonghornFX Technical Analysis
May 29, 20245 min

Daily Price Outlook

Gold price (XAU/USD) halted its previous upward rally and dipped around the $2,348 mark, hitting the intraday low of $2,346.

However, the sharp decline in the gold price might be attributed to the bullish US dollar, which gained traction in the wake of recent hawkish remarks from various Federal Reserve officials and better-than-expected economic data from the US.

This upbeat data and hawkish stance lowered expectations of a possible Fed interest rate cut in September and bolstered the US Dollar.

On the flip side, the ongoing tensions between Israel and Hamas, coupled with global disapproval of airstrikes, create market instability. This, in turn, fuels a surge in demand for safe-haven assets such as gold, aiding in limiting the downward pressure on gold prices.

Moving forward, market participants are closely monitoring the upcoming release of the Fed's Beige Book report and an upcoming speech by John Williams scheduled for Wednesday.

Additionally, all eyes are on the upcoming data, the US Core Personal Consumption Expenditures Price Index (Core PCE), which is scheduled for Friday.

Federal Reserve's Hawkish Stance and Consumer Confidence Impact on Gold Price

On the US front, the broad-based US dollar edged higher on the day, thanks to hawkish comments from Federal Reserve officials and better-than-expected economic data. This lowers the probability of a Fed rate cut in September, strengthening the US dollar and putting pressure on the Gold price.

Fed Governor Michelle Bowman expressed support for a slower pace of reducing stimulus, indicating that she is in favor of a more gradual approach to tapering the central bank's asset purchases or other forms of monetary stimulus.

On the other hand, Fed Minneapolis President Neel Kashkari emphasized the importance of waiting for significant progress on inflation before considering any rate cuts. He anticipates that there may be at most two interest rate cuts in 2024, suggesting a cautious stance on adjusting monetary policy amid the economic landscape.

On the data front, the latest Consumer Confidence figures for May, released by the Conference Board on Tuesday, revealed a modest uptick. The index climbed to 102.0 from April's 97.0, exceeding the projected 95.9. This uptrend suggests a strengthening sense of optimism among consumers, potentially bolstering both economic activity and market outlook.

Hence, the hawkish Fed comments and strong economic data lifted the US dollar, reducing expectations of a Fed rate cut, thus pressuring gold prices downward.

Escalating Middle East Tensions Boost Gold Prices

Amid increasing geopolitical tensions in the Middle East, investors are turning to safe-haven assets such as gold, which helps in limiting its downward trend on Gold price.

Nevertheless, the recent developments include reported Israeli military actions targeting a tent camp within a designated "safe zone" near Rafah, leading to civilian casualties and drawing international attention and apprehension.

However, the situation in Rafah prompted an urgent session of the UN Security Council, responding to Israel's reported ground intervention. Meanwhile, Spain, Ireland, and Norway have formally acknowledged the state of Palestine.

Despite humanitarian assistance efforts, the crisis persists, with a significant number of people displaced and casualties rising in Gaza amid the ongoing conflict between Israel and Hamas.

As a result, the increasing tensions in the Middle East prompt investors to seek refuge in safe-haven assets like gold, providing support to its price amid geopolitical instability.

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

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) is currently trading at $2357.540, reflecting a decline of 0.14% in the latest session. On the 4-hour chart, the pivot point is positioned at $2380.00, which serves as a crucial level for determining the future direction of the market.

Immediate resistance levels are identified at $2380.52, $2392.98, and $2410.52. On the downside, immediate support is found at $2351.93, followed by $2340.03 and $2326.60.

The Relative Strength Index (RSI) is at 49, indicating a neutral market sentiment with a slight bearish bias. 

The 50-day Exponential Moving Average (EMA) is currently positioned at $2378.86, suggesting a significant resistance level near the current price.

The recent decline in gold prices can be attributed to a modest rebound in the US Dollar, driven by stronger-than-expected US economic data and hawkish remarks from several Federal Reserve officials.

These factors have dampened expectations of a Fed rate cut in September, boosting the US Dollar and exerting downward pressure on gold prices. However, ongoing geopolitical tensions and central bank demand for gold continue to provide some support for the precious metal.

The technical outlook for gold indicates that a bullish trend may be initiated if the price breaks above the pivot point of $2380.00. This could lead to a potential rise towards the immediate resistance levels at $2380.52 and beyond.

Conversely, if gold prices fall below the immediate support level of $2351.93, further declines towards $2340.03 and $2326.60 are likely.

In conclusion, the outlook for gold remains cautious. The entry price for a potential buy position is above $2350, with a take profit target at $2380 and a stop loss at $2335.

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