Gold – XAU/USD Analysis - May 31, 2021

Double Top Pattern in Play

Gold prices were closed at $1903.60 after placing a high of $1905.50 and a low of $1881.90. On Friday, gold settled above $1900 and reached near the end of May with an 8% monthly gain, the most significant return in 10 months. The U.S. Dollar Index that measures the greenback value against the basket of six major currencies, rose during the early trading session on Friday and reached 90.44, its highest level since 14th May. However, the dollar could not sustain its upward momentum and started declining during the second half of the day and lost all of its daily gains ending up flat for the session at 90.03. Meanwhile, the U.S. Treasury yields on a 10-year note came under pressure on Friday after rising for the previous two consecutive days and reached 1.57%.

The Dallas Federal Reserve President Robert Kaplan cited reasons for the central bank to start tapering purchases that added strength to the gold prices. Kaplan said that the potential excesses in the housing market and other inflation signs were the indications that the Fed should start slowly pull back on its asset purchase program. He added that the $120 billion worth of asset purchases might be having unintended consequences.

Officials from Federal Reserve have been recently downplaying the rising price pressures and asserted their support to hold monetary policy accommodative for some time. However, Kaplan’s comments to reduce monetary support added strength to the precious metal and supported its daily gains.

On the data front, at 17:30 GMT, the Core PCE Price Index for April rose to 0.7% against the expected 0.6% and supported the U.S. dollar that further caped gains in gold. The Goods Trade Balance dropped to -85.2B against the projected -92.0B and supported the U.S. dollar that limited the rising trend in gold. In April, the Personal Income declined to -13.1% against the forecasted -14.2% and supported the U.S. dollar. The Personal Spending in April remained flat as expected 0.5%.

The Prelim Wholesale Inventories rose to 0.8% against the forecasted 0.7% and weighed on the U.S. dollar, adding further gains in yellow metal prices. At 18:45 GMT, the Chicago PMI surged to 75.2 against the predicted 67.9 and supported the U.S. dollar, and added pressure on rising prices of gold. At 19:00 GMT, the Revised UoM Consumer Sentiment remained flat as expected at 82.9. The revised UoM Inflation Expectations in May also remained flat at 4.6%.

Meanwhile, the U.S. and China’s top trade negotiators held their first meeting under the Biden Presidency. The U.S. Trade Representative Katherine Tai and Chinese Vice Premier Liu held a virtual meeting and addressed the significance of the trade relationship between the two countries. Both sides acknowledged that they had agreed to continue their negotiations. The U.S. and China reiterated that the development of bilateral trade was significant. This added a good impression on the market sentiment and added support to bullion.

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 Monday, the precious metal gold consolidates below the double top resistance level of 1,912 level as this level extends strong resistance to gold now. Gold’s immediate support holds around 1,899 levels, and violation of this exposes the previous metal towards 1,900 and 1,894 support. Gold’s resistance level stays at 1,911 and 1,920 today. The leading indicators such as RSI (Relative Strength Index) and MACD (Moving Average Convergence Divergence) are heading lower towards bearish areas. The crossover of RSI below 50 will add strong bearish pressure on gold. Therefore, bearish bias still dominates today. All the best!