Technical Analysis

GOLD Price Analysis – May 22, 2023

By LonghornFX Technical Analysis
May 22, 20233 min

Daily Price Outlook

The gold price is facing challenges in capitalizing on the moderately positive rebound it experienced on Friday, after reaching its lowest level since early April near $1,950.

As the new week begins, the XAU/USD has shown fluctuations between modest gains and losses during the early European session.

Currently, it is trading around $1,980, showing a slight increase for the second consecutive day.

US Dollar Rebounds, Impacting Gold Price Amid US-China Optimism and Debt Ceiling Concerns

On Monday, the US Dollar (USD) attracted buyers after reaching a two-month high, temporarily halting the decline in its price from Friday. However, this strengthening of the USD has hindered the gold price, which is denominated in USD.

The optimism surrounding a potential improvement in US-China relations, as expressed by President Joe Biden during the G7 conference in Japan, is partially offset by concerns over slowing global growth and the alarming breakdown in negotiations regarding the US debt ceiling.

US debt ceiling woes and economic worries lend support to XAU/USD.

Let's recall that towards the end of the previous week, discussions regarding the potential increase of the US government's $31.4 trillion debt ceiling abruptly broke down.

This situation reduces the likelihood of a timely resolution and raises concerns about the unprecedented possibility of a default on American debt.

Furthermore, Jerome Powell, the chairperson of the Federal Reserve (Fed), made some less assertive remarks that negatively impacted the USD but supported the price of gold, a safe-haven asset.

During a Fed research conference, Powell mentioned the uncertainty regarding the need for further interest rate hikes, considering the uncertainties surrounding the consequences of previous rate increases.

Fed Chair Powell's Less Aggressive Statements Provide Downside Support

Powell restated that the central bank will now assess the situation at each meeting and highlighted that, after a year of substantial rate hikes, policymakers have the luxury of examining the facts and evolving circumstances to make informed decisions.

Powell's preference for a gradual approach to raising interest rates has contributed to a decline in US Treasury bond yields, dissuading USD bulls from taking risky positions and aiding in the limited decrease of gold prices, which do not generally yield.

However, it is important to note that there hasn't been any significant buying activity, urging caution before positioning for potential future appreciation.

 GOLD Price Chart - Source: Tradingview

GOLD – Technical Outlook

Gold prices ended the week at the cool level of $1,977.25, and they're still hanging out around that range. But uh-oh, the stochastic indicator seems to have lost its groove and is flashing those overbought signals. That's putting some negative pressure on the market, especially with the EMA50 throwing shade.

All of these factors are like a cheerleader for the correctional bearish trend, pushing for a target of $1,945.20. However, if the gold price can break free from the negative scenario and surpass $1,977.25, then we might see it score some extra gains, maybe even reaching $2,016.95.

So, for today's trading, we're looking at a range between $1,955.00 as support and $1,990.00 as resistance. And in terms of trend, it's feeling a bit bearish, like a grizzly getting ready for a downward dance.

Let's keep an eye on those gold prices and see where they groove next!



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