Gold – XAU/USD Analysis - May 06, 2021

Triple Top Resistance Ahead!

Gold prices were closed at $1785.15 after placing a high of $1788.10 and a low of $1769.55. Gold reversed its course and recovered about half of its previous day's losses on the back of declining U.S. dollar and the U.S. Treasury yields. The U.S. 10-year bond yield continued falling for the 4th consecutive session on Wednesday and reached 1.56%. Whereas the U.S. Dollar Index that measures the greenback's value against the basket of six major currencies also remained depressive and reached $91.17.

The U.S. Treasury Secretary Janet Yellen initially said on Tuesday that a rate surge might be needed to halt the economy overheating as U.S. President Joe Biden's spending plans boost growth. However, later she downplayed the remarks and said that she saw no inflation problem brewing. The U-turn by Yellen weighed on the benchmark 10-year yield backed off from earlier highs, while the dollar index also eased off a two-week high driven by lower yields and helped lifting bullion's appeal. The gold market discounted the comments of Janet Yellen from yesterday and the fact that Fed was probably not in a position to raise interest rates at the moment.

On the data front, at 17:15 GMT, the ADP Non-Farm Employment Change in April dropped to 742K against the projected 872K and weighed on the U.S dollar that added further gains in the yellow metal.

At 18:45 GMT, the Final Services PMI in April surged to 64.7 against the expected 63.1 and showed an expansion in the service industry that pushed the dollar higher and capped gains in gold. At 19:00 GMT, the ISM Services PMI declined to 62.7 against the forecasted 64.2 and weighed on the U.S. dollar that ultimately added strength in the yellow metal. The two highly awaited data from the U.S., ADP Non-Farm Employment Change and ISM Services PMI both came in negative and weighed on the U.S. dollar on Wednesday that proved beneficial for yellow metal prices as both are inversely correlated.

Meanwhile, Barrick Gold Corporation, one of the world's largest gold producers, reported an increased gain in the 1st quarter of 2021 versus its previous year's performance amid rising gold prices that boosted the revenue. The company also said that it was on track to reach its annual forecasts. The company's revenue came in at nearly $2.96 billion for the first quarter of 2021 which was about 8.8% higher than the $2.72 billion revenue in 2020. The company also reported increased revenues from its copper mines that were raised by 31% this year due to higher copper prices. This news from one of the world's largest gold producers also added strength to the yellow metal prices on Wednesday. On the other hand, the risk-off market sentiment also played an important role in pushing gold prices higher. The global cases of COVID-19 reached 154 million as the cases from India reached above 20.6 million. The rising tensions supported the risk-off market sentiment and added strength to safe-haven gold prices.

Gold Intraday Technical Level

Support Resistance

1766.09 1794.69

1753.92 1811.12

1737.49 1823.29

Pivot Point: 1782.52​

Gold - XAU/USD - Technical Outlook

The yellow metal is trading with a bullish bias at 1,794 level, facing immediate resistance at 1,797. On the 4-hour timeframe, the upward trendline is supporting bullish bias in gold. On the higher side, the triple top pattern will be extending resistance at 1,797 level. A bullish breakout of 1,797 level opens up additional room for buying until 1,804 level. The 20 & 50 periods EMA are suggesting an upward trend in the market. Technical indicators like the RSI and MACD exhibit bullish bias as their values hold in a buy zone. Gold's immediate resistance stays at 1,797 and 1,804, while support stays at 1,788 and 1,781. All the best!