GOLD Price Analysis – May 30, 2023

Daily Price Outlook

The XAU/USD (Gold) failed to stop its downward rally as it hit a two-month low, falling just below the $1,940 level. The selling pressure intensified during the early European session on Tuesday, resulting in the gold price hitting its lowest point since March 17. However, the downward trend could be attributed to the ongoing optimism surrounding the US debt ceiling and the strength of the US Dollar, which are playing a significant role in exerting pressure on the safe-haven appeal of XAU/USD.

US Lawmakers Reach Tentative Agreement to Raise Debt Ceiling, Impacting Investor Confidence and Gold Prices

In a significant development, US lawmakers have recently announced a tentative agreement to raise the debt ceiling, which currently stands at $31.4 trillion. This agreement holds immense importance as it helps prevent the possibility of a default by the world’s largest economy.

Consequently, investors are feeling more confident now and are inclined to invest in riskier assets, creating an overall positive market sentiment. Hence, this shift in investor behavior puts downward pressure on safe-haven assets like gold. Additionally, the recent strong performance of the US Dollar, reaching a two-month high, further contributes to the decline in gold prices.

US Dollar Gains Strength Amid Expectations of Rate Hike and Inflationary Pressures

Despite the prevailing risk-on sentiment in the market, the US dollar has been gaining strength. This can be attributed to a change in investors’ expectations, as they have started anticipating a higher probability of a 0.25% interest rate hike in June.

This change in sentiment was triggered by more hawkish comments made by officials from the Federal Reserve.

Additionally, recent data revealing an unexpected rise in the PCE Price Index, a key measure of inflation favored by the Fed, indicated that inflationary pressures continue. As a result, market expectations have solidified, with investors anticipating the Fed to maintain higher interest rates for a longer period. This has bolstered the US dollar and led to a decline in gold prices.

GOLD – Technical Outlook

The price of gold is currently facing a hurdle in surpassing the $1,970 level on Tuesday, leading to a period of consolidation. Support is being found around the $1,938 level, and a breach below this level has the potential to push gold towards the next support at $1,920 or possibly even lower at $1,915.

Upon analyzing the technical indicators, both the RSI and MACD show bearish signals. The RSI has dropped below the 50 level, indicating a strong selling pressure affecting gold prices. Additionally, the MACD is forming shorter histograms, further confirming the prevailing bearish sentiment.

Currently, the double bottom pattern provides significant support at $1,938. A successful break below this level would likely sustain the downward trend in gold.

On the four-hour timeframe, there exists a downward trend line acting as a prominent resistance for gold. If there is a breakthrough above this trend line, it suggests a possible continuation of the selling pressure below the $1,955 level.

It is crucial to closely monitor the $1,938 level. If gold remains above this level, there is a chance of a corrective bounce towards $1,955. However, breaching below $1,955 could indicate renewed selling interest in the precious metal.