Gold – XAU/USD Analysis - May 17, 2021

Three White Soliders Pattern!

Gold prices were closed at $1843.85 after placing a high of $1845.50 and a low of $1819.45. Gold extended its gains on Friday and reached the $1845 level on the back of the weak U.S. dollar amid poor-than-expected U.S. economic data. Gold posted about 0.8% gain for the day on Friday and a 0.3% gain for the week. It was a second straight weekly gain posted by gold due to decreased strength in the U.S. dollar. The survey from the University of Michigan said that U.S. Consumer Confidence dropped in May as Americans started worrying about inflation and its impact on their incomes.

The Federal Reserve acknowledged that prices were rising due to disrupted supply chains that were struggling to cope with the demand in an economy after re-opening from pandemic-induced lockdowns. However, the central bank said that these inflationary pressures were temporary and will fade eventually with the recovery in the economy. Fed has also said that there was no need to raise interest rates yet.

On the data front, at 17:30 GMT, Retail Sales for April dropped to 0.0% against the expected 1.0% and weighed on the U.S. dollar that pushed gold prices higher. The Import Prices remained flat with the expectations. At 17:32 GMT, the Core Retail Sales also dropped to -0.8% against the forecasted 0.5% and weighed on the U.S. dollar that added further gains in gold prices. At 18:15 GMT, the Industrial Production for April also declined to 0.7% against the projected 0.9% and weighed on the U.S. dollar and pushed gold prices higher.

The Capacity Utilization Rate remained flat at an expected 75.0%. At 19:00 GMT, the Prelim UoM Consumer Sentiment for May reduced to 82.8 against the estimated 90.2 and weighed on the U.S. dollar and added further strength in rising prices of gold. Business Inventories remained flat at 0.3%. The Prelim UoM Inflation Expectations also remained the same as expected 4.6%.

The poor than expected macroeconomic data from the U.S. on Friday weighed heavily on the greenback as the U.S. Dollar Index that measures the value of the greenback against the basket of six major currencies fell to $90.27 on Friday. The U.S. Treasury yields on a 10-year note also declined on Friday and reached 1.625%. Furthermore, an Independent Panel for Pandemic Preparedness and Responses released a report on global handling of coronavirus pandemic that stated that global crisis could have been avoided if proper measures had been taken.

The panel concluded that WHO should have declared a public health emergency sooner, while countries took too long to implement measures to curb the spread of the virus. The panel also said that to avoid such a crisis in the future, the WHO should be granted more financing and more authority in publishing outbreak-related information. The panel also urged rich countries to donate at least one billion vaccine doses to COVAX by September and emphasized the importance of agreeing on voluntary licensing and transfer of vaccine technology to increase global supply. This report added weight to the already declining U.S. dollar and pushed gold higher. Meanwhile, the rising tensions between Palestine and Israel after airstrikes and missile attacks added to the fears of a new war that led to the risk-off market sentiment that ultimately supported safe-haven yellow metal prices.

Gold Intraday Technical Level

Support Resistance

1812.89 1833.19

1800.52 1841.12

1792.59 1853.49

Pivot Point: 1820.82

Gold - XAU/USD - Technical Outlook

Gold is trading strongly bullish at 1,853, having violated the double top resistance level of 1,844 on the daily timeframe. Above this, gold’s next immediate resistance stays at 1,854. A violation of this exposes gold towards 1,874 areas. At the same time, the support continues to be at 1,844 level. The RSI and MACD support a buying trend, along with the 20 and 50 EMA held at 1,807 level. Gold has closed three white soliders pattern that demonstrates srong bullish bias amoung investors on the daily timeframe. All the best!