Gold – XAU/USD Analysis - May 28, 2021

Chicago PMI Ahead!

Gold prices were closed at $1896.90 after placing a high of $1903.90 and a low of $1888.30. On Thursday, gold remained steady and flat throughout the day as easing U.S. Treasury yields offset the upbeat U.S. data that showed a recovery in the world's largest economy was on track.

The U.S. Dollar Index gauges the greenback value against the basket of six major currencies closed on Thursday at 90.01 with minor losses for the day. The U.S. Treasury yields on the 10-year note rose to 1.625% on Thursday but eased from daily high and closed the day at 1.60%. The declining U.S. Treasury yields translated into the reduced opportunity cost of holding non-yielding bullion.

On the data front, the long-awaited Prelim GDP in the first quarter declined against the expectations and kept the dollar under pressure that supported gold prices. However, gold failed to provide a significant movement on the day as unemployment claims from last week remained in support of the U.S. dollar. At 17:30 GMT, the Prelim GDP for the quarter declined to 6.4% against the expected 6.5% and weighed on the U.S. dollar that pushed gold prices higher. Last week, the Unemployment Claims dropped to 406K against the forecasted 427K, supported the U.S. dollar, and kept gold under pressure. The Core Durable Goods Orders surged to 1.0% against the projected 0.8%, helped the U.S. dollar, and added further gold prices.

The Durable Goods Orders declined to -1.3% against the predicted 0.8% and weighed on the U.S. dollar, and capped further losses in gold. The Prelim GDP Price Index for the quarter rose to 4.3% against the expected 4.1% and supported the U.S. dollar. At 19:00 GMT, the Pending Home Sales in April declined to -4.4% against the predicted 0.6% and weighed on the U.S. dollar and added strength in precious metal. Prices of almost everything, from houses to the lumber that goes into building them, have soared to a high level in recent months, and it has scared the economists into believing that inflation on growth in 2021 could be the highest in 35 years.

A higher inflationary environment is considered beneficial for gold as it's considered as a hedge against inflation and a store of value in times of financial and political troubles. However, in recent months, the rivals of gold, including the dollar and U.S. bond yields, have rallied instead on signs of increasing inflation as investors bet that the Fed will hike interest rates faster than projected.

On the flip side, the Central bank has sworn not to increase interest rates until 2023. Such speculation triggered a massive sell-off in gold and sent its prices to an 11-month lowest level below $1674. Nevertheless, the retreat in yields and the weak U.S. dollar helped gold come back to $1800 and above, and now yellow metal has been trying to sustain its foot above the $1900 level.

Gold Intraday Technical Level

Support Resistance

1888.84 1904.44

1880.77 1911.97

1873.24 1920.04

Pivot Point: 1896.37

Gold - XAU/USD - Technical Outlook

On Friday, the precious metal gold hasn't changed a lot amid the lack of major economic events. The metal is trading at a 1,890 level, exhibiting a bearish correction below a 1,912 resistance level. On the 4-hour timeframe, 1,890 level is the same old resistance level that was violated when gold crossed over ascending triangle pattern. At the moment, this level of 1,890 is supporting gold, and a bullish bounce off over this level exposes the pair towards a 1,912 resistance level. The leading indicators such as RSI (Relative Strength Index) and MACD (Moving Average Convergence Divergence) support a solid bullish bias. Gold's immediate support holds around 1,891 today, and bullish bias still dominates. All the best!