Gold – XAU/USD Analysis - May 21, 2021

European PMI Figures Ahead!

Gold prices were closed at $1874.35 after placing a high of $1884.50 and a low of $1864.25. The yellow metal remained steady on Thursday due to weakness in the U.S. dollar driven by fears of rising inflation. This also offset the pressure for bullion from tapering talks from the U.S. Federal Reserve and helped gold to rise.

The U.S. Dollar Index (DXY) that measures the greenback value against the basket of six major currencies, fell on Thursday, lost almost all of its previous day’s gains, and reached 89.75. The U.S. Treasury yield on a 10-year note also declined on Thursday to 1.625% and weighed on the U.S. dollar.

On the data front, at 17:30 GMT, the Philly Fed Manufacturing Index dropped to 31.5 against the forecasted 40.8 and weighed on the U.S. dollar that helped yellow metal posted gains for the day. However, the Unemployment Claims from the past week slipped to 444K against the expected 453K and supported the U.S. dollar that capped further gold prices. At 19:00 GMT, the CB Leading Index rose to 1.6% against the expected 1.3% and helped the U.S. dollar that limited the gains in gold prices.

Gold steadied after the unemployment claims made by Americans during last week dropped below the expected figure and depicted a strong employment condition of the economy which means the employment goals set by the Fed were also getting closer. This raised expectations of tapering by Fed sooner than expected and supported the U.S. dollar that kept gold prices steady.

On Thursday, the CEO of Barrick Gold, Mark Bristow, dismissed the idea that cryptocurrencies were a better store of value than traditional gold. According to bitcoin supporters, the limited supply of the digital coin and its extraordinary growth makes it a better hedge against inflation than gold. At the same time, Bristow pushed back on these features and criticised the speculative assets for being too volatile to be considered a safe investment. These comments from Bristow added strength to gold prices on Thursday.

Furthermore, the risk-off market sentiment that the Israel-Palestine military conflict has fuelled cooled away on late Thursday after the Israeli government agreed to a mutual ceasefire with Palestine Islamic Jihad and Hamas, proposed by Egypt. The end to 11 days of exchange of rocket strikes and airstrikes between Israel and Palestine lifted the risk-off market sentiment and capped further gains in gold prices.

Gold Intraday Technical Level

Support Resistance

1864.24 1884.49

1854.12 1894.62

1834.99 1904.74

Pivot Point: 1874.37

Gold - XAU/USD - Technical Outlook

On Friday, the precious metal gold continues to follow the same technical levels as discussed in Thursday’s report. Gold continues trading sideways, maintaining a choppy range of 1,878 – 1,870 on the daily timeframe. On the 4-hour chart, the pair is gaining support at 1,869 level now and resistance at 1,889. Currently, gold has entered the buy zone, underpinned by 20 & 50 periods EMA around 1,869. The RSI is holding at 55.23 and the MACD at 1.512, supporting an upward trend in gold. The primary focus of investors will remain on the 1,869 pivot point level as above this bullish bias prevails. Later today, the U.S. economy isn’t expected to release any significant event, and all of the focus will remain on the European PMI figures. All the best!