Technical Analysis

GOLD Price Analysis – June 5, 2024

By LonghornFX Technical Analysis
Jun 5, 20244 min

Daily Price Outlook

Gold price (XAU/USD) managed to halt its previous-day losing streak and gained positive traction around the $2,332 level, hitting an intraday high of $2,341. However, the upward trend in the gold price was driven by a combination of factors, including the latest weakness in the US dollar.

The US dollar lost some of its gains on the back of previously released downbeat US economic data, which boosted expectations that the Federal Reserve will cut interest rates later this year.

In addition to this, renewed conflicts in the Middle East were seen as another key factor that kept the gold price higher.

Moving ahead, traders seem hesitant to take strong positions ahead of the release of crucial US monthly employment details, namely the Nonfarm Payrolls (NFP) report on Friday. Meanwhile, the US ADP report on private-sector employment and the US ISM Services PMI will be in the spotlight.

Weak US Dollar and Economic Concerns Drive Expectations of Rate Cuts, Fueling Gold Price Surge

On the US front, the broad-based US dollar was unable to maintain its upward trend and lost some of its gains, thanks to previously released downbeat US economic data, which boosted expectations that the Federal Reserve will cut interest rates later this year.

This belief has kept US Treasury bond yields low, benefiting gold prices. Meanwhile, ongoing concerns about the US economy softening more than expected have solidified expectations for a Federal Reserve rate cut in September, pushing Treasury bond yields lower and further supporting gold prices.

According to the previously released data, the Job Openings and Labor Turnover Survey (JOLTS) report revealed a larger-than-expected drop in job openings, down by 296,000 to 8.059 million in April, marking the lowest level in over three years.

This adds to concerns raised by the recent disappointing US ISM Manufacturing Purchasing Managers' Index (PMI) released earlier this week, indicating unexpected weakness in business activity and suggesting a slowdown in the US economy.

Thus, the weakening US dollar and concerns over the US economy have bolstered expectations of rate cuts, boosting gold prices.

Escalation of Conflict in Gaza Fuels Demand for Safe-Haven Gold Amid Humanitarian Crisis and Geopolitical Tensions

If talking about geopolitical issues, the situation in Gaza has escalated once more, with Israeli air attacks and shelling causing casualties among civilians and policemen. Israeli ground forces have entered the Bureij refugee camp, while airstrikes and artillery continue.

Hamas is insisting on a permanent truce and complete withdrawal from Gaza for any ceasefire negotiations to proceed.

Furthermore, hunger-related fatalities are on the rise in Gaza, with forecasts indicating worsening conditions until July unless there are adjustments to food distribution. Nevertheless, the toll from Israel's conflict with Gaza since October 7 comprises over 36,000 Palestinians killed and nearly 83,000 wounded.

Therefore, the escalation of conflict in Gaza, coupled with humanitarian concerns and geopolitical tensions, often leads investors to seek safe-haven assets like gold. Meanwhile, increased geopolitical instability can contribute to higher demand for gold as a hedge against uncertainty, pushing prices higher.

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

GOLD (XAU/USD) - Technical Analysis

Gold prices (XAU/USD) are currently trading at $2,330.40, up 0.46% on the four-hour chart. The metal has seen a slight uptick as it navigates through a complex technical landscape. Key price levels to watch include a pivot point at $2,341.28.

Immediate resistance is situated at $2,354.86, followed by further resistances at $2,364.43 and $2,376.47. On the downside, immediate support is found at $2,316.39, with subsequent supports at $2,304.52 and $2,292.00.

Technical indicators provide a mixed outlook. The Relative Strength Index (RSI) is currently at 44, suggesting that gold is neither overbought nor oversold, indicating potential for both upward and downward movements.

The 50-Day Exponential Moving Average (EMA) stands at $2,341.46, just above the current price, acting as a significant resistance level.

In the current market scenario, the strategic entry price is recommended below $2,342. A sell position at this level is advised with a take profit target set at $2,316. The stop loss should be placed at $2,360 to mitigate potential upward spikes that may breach the immediate resistance.

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