Gold – XAU/USD Analysis – June 01, 2021

Choppy Sessions in Play

Gold remained firm on Monday amid the declining value of the U.S. dollar while the inflationary pressures lifted bullion’s appeal. The U.S. Dollar Index posted its second straight monthly decline and settled at 89.93 below 90 levels and added support to the rising prices of precious metal. The U.S. Treasury yield on a 10-year note also fell on Monday and reached 1.58% that added further pressure on the greenback and lifted gold prices even higher.

Another reason behind the upward momentum in gold prices on Monday was the latest economic data release from the world’s largest gold consumer nation. The Chinese data on Monday revealed that the Manufacturing Purchasing Managers Index (PMI) was 51 and the Non-Manufacturing PMI was 55, both indicated growth in respective sectors. The data was slightly lower than expected despite showing growth in the sector.

In the second-largest gold consumer country, India, the physical gold demand remained lower as well because jewellery shops remained closed amid the country’s coronavirus outbreak.

Another reason behind the latest upward momentum in gold prices could be the rising number of coronavirus from across the globe. According to the Johns Hopkins University, the total number of cases and fatalities surged above 170 M and 3.5M respectively on Monday. The new variants of coronavirus were spreading faster than ever before in several nations and pushed the global count above 170 M.

Meanwhile, a Chinese think-tank including members from regulators, academia, and financial institutions said in a report that the Biden Administration was unlikely to remove tariffs on Chinese goods in short-term, however, China and the U.S. might have found a middle ground by raising tariff exclusions as a way to reduce tensions.

The report also suggested that Washington might look to reduce the tariff burden through tariff exclusions as the United States was facing inflationary pressures in the first half of this year. Whereas, the Biden administration was conducting a comprehensive review of U.S. - China trade policy ahead of the expiry of the phase-1 deal at the end of 2021.

Moreover, many Federal Reserve officials have said that recent price pressures were already expected as the economy reopened and the demand surged, and they should prove temporary as supply shortage will soon abate. However, the latest data related to the PCE price index from the U.S. that Fed uses for its inflation target showed a surge to 3.6% from a year earlier, this was the biggest jump since 2008. The latest PCE figures suggested otherwise that price pressure could remain for a longer than expected time period and hence, the U.S. dollar weakened that pushed gold prices in the upward direction.

Gold Intraday Technical Level

Support Resistance

1905.94 1907.74

1905.12 1908.72

1904.14 1909.54

Pivot Point: 1906.92

Gold - XAU/USD - Technical Outlook

On Tuesday, the precious metal gold trades below the double top resistance level of 1,912 level. Gold’s immediate support holds around 1,899 levels, and violation of this exposes the previous metal towards 1,900 and 1,894 support. Gold’s resistance level stays at 1,911 and 1,920 today. The leading indicators such as RSI (Relative Strength Index) and MACD (Moving Average Convergence Divergence) are heading lower towards bearish areas. The crossover of RSI below 50 will add strong bearish pressure on gold. Therefore, bearish bias still dominates today. All the best!