Gold – XAU/USD Analysis - May 19, 2021

FOMC Meeting Minutes Ahead!

Gold prices were closed at $1870.50 after placing a high of $1875.85 and a low of $1863.75. On Tuesday, gold remained flat after rising for four consecutive days after hitting a four-month high. Gold eased slightly, although yields on U.S. Treasuries inched lower, and the U.S. dollar remained weak. The fears of inflation also maintained the floor under bullion prices, and hence, gold remained flat throughout the day. On Tuesday, the U.S. Dollar Index fell to its lowest since 25th February and extended its losses to $89.69. Greenback dropped for the 3rd consecutive session and supported the bullion prices. The U.S. Treasury yields on a 10-year note also fell on Tuesday and reached 1.628%, making gold more appealing.

The flat movement of yellow metal on Tuesday could be attributed to the correction or profit-taking. Investors also remained concerned about potential interest rate hikes to curb rising inflation. Investors believed that a sign of rising inflation would urge the Federal Reserve to increase interest rates earlier than expected. However, the Atlanta Fed President Raphael Bostic said that he was comfortable with the central bank’s ultra-loose accommodative policy as inflation was spreading across the economy. Bostic even considered rising inflation as a positive sign and said that the recent rising prices were only temporary and likely faded later this year. Meanwhile, Fed President Robert Kaplan also said that inflation was not a problem and reiterated that he did not expect a hike in an interest rate until 2022. He predicted a growth of 6.5% in the gross domestic product in 2021.

On the data front, at 01:00 GMT, TIC Long-term Purchases rose to 262.2B against the expected 67.0B and supported the U.S. dollar, and added pressure on gold. At 17:30 GMT, Building Permits remained flat as expected 1.77M. The Housing Starts declined to 1.57M against the anticipated 1.71M and weighed on the U.S. dollar and supported gold.

Investors now await the minutes from Fed’s last meeting for further clues to the movement of the Fed’s monetary policy that will be released on Wednesday. Gold also remained flat ahead of the Fed’s meeting minutes as investors were waiting to find some clue before diving into the market.

Furthermore, given the rising tensions between Palestine and Israel, on Tuesday, France offered a resolution with the United Nations Security Council (UNSC) in cooperation with Egypt and Jordan. It called for a ceasefire in the Israel-Gaza conflict. However, U.S. blocked a UN Security Council statement calling for a ceasefire. These adverse developments kept safe-haven yellow metal flat on Tuesday.

Gold Intraday Technical Level

Support Resistance

1843.80 1849.70

1840.35 1852.15

1837.90 1855.60

Pivot Point: 1846.25

Gold - XAU/USD - Technical Outlook

Technical side of gold hasn’t changed much as it continue trading strongly bullish at 1,870, having violated the double top resistance level of 1,844 on the daily timeframe. On the 4-hour chart, the pair is gaining support at 1,862 level now along with a resistance at 1,877. Currently gold has entered the overbought zone and facing solid headwind. On the 4-hour timeframe, gold has also closed bullish engulfing candle above 1,864 level that demonstrates that buys are gaining power and sellers are losing control. Gold's immediate support stays at 1,863 and 1,844 areas along with resistance at 1,877 and 1,889. All the best!