Technical Analysis

GOLD Price Analysis – May 27, 2024

By LonghornFX Technical Analysis
May 27, 20244 min

Daily Price Outlook

Despite the hawkish remarks from Federal Reserve (Fed) officials and strong US economic data, Gold (XAU/USD) has managed to prolong its upward trend and remained well bid around $2,338, hitting the intraday high of $2,347.

However, the bullish bias can be attributed to recent Israeli airstrikes in Rafah's displaced people camp, which killed 35 Palestinians and wounded many more. This boosted safe-haven demand for gold, as investors seek refuge from market uncertainty.

Conversely, the robust economic indicators and hawkish statements from US Federal Reserve (Fed) officials tempered anticipations for rate cuts, curbing upward momentum in the gold market.

Recent Developments and Outlook in the US Economy

On the US front, recent economic reports have been positive, indicating a robust economy. Additionally, Federal Reserve officials have adopted a hawkish stance, signaling a preference for policies aimed at controlling inflation rather than stimulating growth.

As a result, hopes for future interest rate cuts have diminished among investors. Previously, investors may have anticipated multiple rate cuts, but now they are leaning towards only one cut by the end of the year. This shift in sentiment is prompting investors to reassess their investment strategies.

Meanwhile, the indication of a stronger economy implies that the Federal Reserve may choose to maintain interest rates at their current levels for a longer period to address concerns about inflation.

On the data front, US Durable Goods Orders increased by 0.7% in April, surprising experts who had anticipated a decline of 0.8%, following a downward revision in March.

Concurrently, the University of Michigan's Consumer Sentiment Index rose to 69.1 in May from April's 67.4, surpassing the anticipated 67.5. Inflation expectations for the next year edged up slightly to 3.3% from 3.2%, while expectations for the next five years saw a slight dip to 3% from 3.1%.

Therefore, the positive economic reports and hawkish stance from the Federal Reserve have diminished expectations for interest rate cuts, reducing the demand for gold as an inflation hedge.

Looking ahead, US banks will be closed on Monday for Memorial Day. Traders will be paying attention to speeches from Federal Reserve officials such as Michelle Bowman, Loretta Mester, and Neel Kashkari on Tuesday.

Additionally, the release of the first-quarter US GDP is anticipated to show growth of 1.5%. Positive GDP data may bolster the US dollar, impacting gold prices.

Geopolitical Tensions Between Israel and Hamas Drive Safe-Haven Demand for Gold

Another factor boosting the gold price is the recent Israeli airstrikes on a displaced people's camp in Rafah. These attacks, resulting in significant casualties, escalated tensions between Israel and Hamas, prompting fears of further conflict.

With geopolitical uncertainty rising and concerns about stability in the region mounting, investors are turning to gold as a safe-haven asset, driving up its demand and price.

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

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) is trading at $2,338.895, marking a 0.34% increase in value. This uptick comes amidst a backdrop of mixed market signals, with investors cautiously optimistic about the metal’s short-term prospects.

The pivot point at $2,360.00 is a critical level for market direction. Immediate resistance levels are found at $2,352.61, $2,368.37, and $2,392.98. On the downside, immediate support is at $2,307.23, followed by $2,291.85 and $2,277.62.

The Relative Strength Index (RSI) stands at 35, indicating that the metal is approaching oversold conditions, which could suggest potential upward momentum if buying interest increases.

The 50-day Exponential Moving Average (EMA) is at $2,385.05, positioning the current price below this key indicator and suggesting a bearish trend in the medium term.

Given the current technical setup, the strategy would be to buy above $2,327, with a take profit target at the pivot point of $2,360 and a stop loss at $2,313. This approach capitalizes on the potential for a rebound from current support levels while managing downside risk effectively.

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