Technical Analysis

GOLD Price Analysis – June 3, 2024

By LonghornFX Technical Analysis
Jun 3, 20244 min

Daily Price Outlook

Despite expectations of a potential Federal Reserve rate cut and a softer US dollar, the Gold price (XAU/USD) has been unable to reverse its downward trend and remains under pressure around the 2,318 mark, reaching a low of 2,314 during the day.

This decline could be linked to the risk-on sentiment in the market, buoyed by prospects of a ceasefire in Gaza. It should be noted that the recent positive outlook regarding a potential ceasefire arrangement for Gaza, as announced by US President Joe Biden, has dampened the demand for safe-haven assets such as Gold.

Looking ahead, traders are eagerly anticipating the release of significant US economic data this week, particularly the Nonfarm Payrolls (NFP) report scheduled for Friday.

Meanwhile, the decisions of central banks such as the Bank of Canada (BoC) on Wednesday and the European Central Bank (ECB) meeting on Thursday will also play a crucial role in influencing the Gold market.

Impact of US Dollar Weakness and Fed Rate Cut Speculation on Gold Prices

On the US front, the broad-based US dollar has been showing bearish trend and edged lower on the day due to increasing speculation that the Federal Reserve (Fed) might lower interest rates in the coming months. This perception is driven by indications of easing inflationary trends in the country.

However, the latest US inflation report, meeting projected figures, has added to the speculation of potential Fed rate cuts. Consequently, the US Dollar is depreciating, leading to a rise in the price of Gold as investors turn to alternative safe-haven options.

On the data front, the US Bureau of Economic Analysis (BEA) recently released figures showing a 0.3% increase in the Personal Consumption Expenditures (PCE) Price Index for April, in line with the anticipated 2.7% annual rate.

Additionally, the Core PCE Price Index, which excludes volatile components such as food and energy, also matched expectations with a yearly increase of 2.8%.

Therefore, the bearish trend in the US dollar and expectations of Fed rate cuts have bolstered Gold prices as investors seek safe-haven alternatives, mitigating deeper losses for Gold.

US President Biden's Gaza Ceasefire Plan Impact on Gold Prices

On the geopolitical front, US President Joe Biden has proposed a three-part plan to end the conflict in Gaza. The plan includes a six-week ceasefire with the withdrawal of IDF forces, a surge of humanitarian aid, and an exchange of hostages for Palestinian prisoners. Hamas has shown a positive view of the proposal.

The plan aims for a permanent cessation of hostilities and a major reconstruction plan for Gaza, with international assistance. However, the negotiations between phases one and two are expected to be challenging, but the US push for a permanent ceasefire marks a significant concession to restart negotiations.

As a result, traders are exercising caution and refraining from making strong bullish bets on commodities, including gold, due to the optimism surrounding President Biden's new ceasefire plan for Gaza. This cautious approach is likely contributing to a drop in gold prices today, as investors are not rushing to buy gold.

Therefore, the positive news of a new ceasefire plan for Gaza by US President Joe Biden has undermined the safe-haven appeal of gold, leading to a neutral or slightly negative impact on its prices as traders adopt a less bullish stance.

GOLD Price Chart - Source: Tradingview
GOLD Price Chart - Source: Tradingview

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) is trading at $2,327.25, slightly down by 0.01% in the 4-hour timeframe. The immediate technical outlook for gold shows it hovering just below the pivot point of $2,332.64, suggesting a cautious market sentiment.

Key price levels indicate that the immediate resistance is at $2,359.49, with subsequent resistance at $2,375.55 and $2,394.38. On the downside, immediate support is noted at $2,307.51, followed by $2,287.30 and $2,267.82, indicating potential areas where buying interest may emerge.

The Relative Strength Index (RSI) is at 39, suggesting that the market is currently not in the overbought or oversold territory but closer to the latter, hinting at potential for further declines. The 50-day Exponential Moving Average (EMA) stands at $2,350.27, which is above the current price, underscoring a bearish trend in the short term.

Given the technical indicators, gold appears to be under selling pressure. The recommendation for traders is to consider selling below $2,333, with a take profit target at $2,297 and a stop loss at $2,360.

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