Technical Analysis

GOLD Price Analysis – May 18, 2023

By LonghornFX Technical Analysis
May 18, 20234 min

Daily Price Outlook

The yellow-Metal Gold price failed to stop its downward rally and dropped to near a two-week low around 1,976 level. Gold price dropped and reached an intraday low level of 1,972. However, the decline can be attributed to the strength of the US dollar, which has put pressure on the price of gold. Moreover, the expectations of a hawkish Federal Reserve have played a significant role in undermining gold prices.

Stronger US Dollar Puts Pressure on Gold Prices

As mentioned earlier, the US dollar is strengthening for the second consecutive day, reaching its highest level in nearly two months. Thus, this upward momentum is posing challenges for the price of gold, as a stronger dollar makes it harder for gold prices to increase. However, the strength of the dollar is primarily driven by comments made by various Federal Reserve officials, which have contributed to market expectations of a more hawkish monetary policy stance.

They have expressed a more hawkish view, meaning they are less likely to cut interest rates soon. This has made the US dollar more attractive to investors, which in turn puts pressure on the price of gold. One Fed official, Loretta Mester, even mentioned that interest rates might need to be raised further.

Fed's Hawkish Stance and Rising Inflation Expectations Pose Challenges for Gold Prices

Federal Reserve officials like Austan Goolsbee and Raphael Bostic have stated that it's not yet the right time to lower interest rates. They have highlighted the significance of managing inflation and emphasized that even if the unemployment rate increases in the coming months, it is crucial to maintain control over inflation.

These statements, combined with increased consumer inflation expectations, have led to market speculation that the Federal Reserve will maintain higher interest rates for a longer period. This, in turn, creates another barrier for gold prices, as gold does not provide any yield or interest. Investors may be more inclined to favor assets that offer higher returns, dampening the demand for gold.

Global Risk Sentiment and Lack of Buying Interest Weigh on Gold Prices

Apart from this, the declines in gold prices were further bolstered by the improved global risk sentiment, which could discourage traders from making strong bullish bets on gold. Furthermore, the absence of significant buying interest indicates that gold is more likely to continue its downward trajectory, with any attempts at recovery potentially short-lived.

Investors are now focusing on upcoming data related to the US housing market and monitoring developments in the negotiations over the US debt limit, as these factors could provide new momentum and direction for the market.

Gold Prices Find Support Amid Debt Ceiling Negotiations

On the positive side, the precious-metal prices receive some support as the ongoing negotiations to raise the US government's borrowing limit contribute to a safe-haven appeal for gold and help prevent significant declines, at least for now.

House of Representatives Speaker Kevin McCarthy stated that there are still substantial differences between the parties involved. Both US President Joe Biden and Republican leaders remain cautiously optimistic about reaching an agreement to raise the US debt ceiling, which adds to the current situation surrounding gold prices.

 GOLD Price Chart - Source: Tradingview

GOLD – Technical Outlook

The price of the precious metal gold continues to experience downward pressure and is currently trading around the $1980 level. On the two-hour timeframe, a bearish candlestick pattern known as an engulfing pattern has formed, indicating a strong bearish bias and suggesting that sellers are dominating the market below the $1985 resistance level.

This resistance level is further reinforced by the 50-day exponential moving average, visible on the two-hour timeframe. Additionally, both the RSI and MACD indicators are in the selling zone, signaling further selling potential in the gold market.

Therefore, gold is likely to encounter immediate resistance around the $1985 level, with potential support found at $1975 and $1965 if gold remains below the key $1975 level.


    * GBP/USD Price Analysis – May 18, 2023

    * S&P500 (SPX) Price Analysis – May 18, 2023

    * GOLD Price Analysis – May 16, 2023



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