Gold – XAU/USD Analysis - May 18, 2021

Safe Haven Appeal Triggers!

Gold prices were closed at $1869.55 after placing a high of $1869.75 and a low of $1844.00. Gold extended its gains for the 4th consecutive session and reached its highest since January 2021. The rising prices of yellow metal could be attributed to the weakness in the U.S. dollar and losses in the benchmark U.S. stock indexes. The U.S. Dollar Index that measures the greenback's value against the basket of six major currencies extended its losses and continued its bearish streak for 3rd consecutive session and reached a $90.15 level on Monday. The U.S. Treasury yield on the 10-year note dropped to 1.605% in the early session on Monday but managed to recover most of its daily losses and reached 1.652%.

Meanwhile, the benchmark stock indexes of the NYSE fell and posted losses on Monday that helped gold gathered its strength against the U.S. dollar. The NASDAQ fell by -0.60% and reached $13,196.57, S&P 500 dropped by -0.25% to $4142.69, and Dow Jones Industrial Average declined by -0.16% and reached $34,176.65.

On the data front, at 17:30 GMT, Empire State Manufacturing Index rose to 24.3 against the forecasted 23.9 and supported the U.S. dollar, and capped further gains in the yellow metal. At 19:00 GMT, the NAHB Housing Market Index remained flat as expected 83. On Monday, the Fed Chair Richard Clarida said that the U.S. economic growth could hit 7% this year as labor and other supply bottlenecks get resolved, and the recovery accelerates. He also added that it might take more time to re-open a $20 trillion economy than it did to shut it down.

Meanwhile, the Atlanta Federal Reserve President Raphael Bostic also said on Monday that he was comfortable with the ultra-loose policy of the central bank even as inflation was gaining steam in the economy.

Bostic repeated that there was still an 8 million jobs shortage compared to the pre-pandemic level. Until this gap is closed, Fed will likely keep policies in a very strongly accommodative stance. Bostic considers rising inflation as a positive sign and has often said that the most recent price increases were temporary factors that will disappear later this year.

Furthermore, another factor included in the rising prices of safe-haven metal was the prevailing war-like situation between Palestine and Israel. According to a human rights group, Amnesty International, Israel's shocking disregard for Palestinian civilians might be a war crime.

On Monday, the group of human rights stated that the Israeli government has engaged in a pattern of deadly attacks against residential homes in Gaza. According to Amnesty International, the Israeli government carried out bombing raids without giving the innocent men, women, and children inside any time to escape. This act by Israel may amount to a crime against humanity and a war crime. The escalating tensions between Israel and Palestine could trigger a war, and these fears raised an appeal for safe-haven metal that supported rising prices of gold prices on Monday.

Gold Intraday Technical Level

Support Resistance

1863.80 1874.70

1844.35 1889.15

1837.90 1900.60

Pivot Point: 1863.25

Gold - XAU/USD - Technical Outlook

Gold is trading strongly bullish at 1,870, having violated the double top resistance level of 1,844 on the daily timeframe. Closing of candles above 1,844 level supports a solid upward trend in gold. At the moment, gold has entered the overbought zone and facing solid resistance at 1,874 level. On the 4-hour timeframe, gold has also closed Doji candles below 1,874 level that demonstrates that buys are exhausted, and sellers are looming around the corner. Typically, such scenarios drive bearish correction in security, and gold can exhibit downward correction in case of failure to break 1,874. Gold's immediate support stays at 1,863 and 1,844 areas along with resistance at 1,874 and 1,889. All the best!