Technical Analysis

GOLD Price Analysis – May 31, 2024

By LonghornFX Technical Analysis
May 31, 20244 min

Daily Price Outlook

Gold prices (XAU/USD) maintained its upward trend and remained well bid around around the 2,343.38 level and reaching an intraday high of 2,347.80. However, the ongoing bullish trend can be largely attributed to a weakening US dollar, which declined following disappointing US GDP figures. These figures led traders to speculate that the Federal Reserve might cut interest rates this year, adding pressure on the US dollar and consequently driving up gold prices.

Additionally, geopolitical risks and conflicts in the Middle East were another significant factor pushing up the price of gold, which is traditionally viewed as a safe-haven asset. Looking ahead, traders will focus on the US April Core Personal Consumption Expenditures Price Index (Core PCE), anticipated to reflect a 0.3% monthly rise and a 2.8% year-over-year increase for April.

US Dollar Weakness and Economic Uncertainty Support Gold Prices

On the US front, the broad-based US dollar US dollar has been flashing red, gradually declining as traders speculate on the likelihood of the Federal Reserve reducing interest rates this year, prompted by lackluster US GDP data. Notably, Chicago Fed President Austan Goolsbee has expressed worries about housing inflation despite acknowledging a robust labor market. Conversely, Atlanta Fed President Raphael Bostic believes a rate cut in July is improbable due to decelerating inflation. Meanwhile, New York Fed President John Williams remains optimistic that inflation will ease in the latter part of the year.

On the data front, the second estimate of US GDP indicated that the economy expanded at an annualized pace of 1.3% in Q1. This figure marked a decline from the earlier reading of 1.6% but aligned with market forecasts. Concurrently, US weekly Initial Jobless Claims for the week ending May 25 rose marginally to 219K from 216K, slightly surpassing the market consensus of 218K.

Therefore, the weakening US dollar, coupled with concerns over rate cuts and mixed economic data, supports gold prices amid uncertain market sentiment.

Geopolitical Tensions Drive Gold Prices Higher

On the geopolitical front, the long-lasting conflicts in the Middle East, particularly involving Israel and Gaza, were seen as another key factor that kept the gold price higher as investors sought safe-haven assets. Israel's recent assertion of control over Gaza's land border with Egypt will likely weaken its relationship with Egypt, adding to regional tensions.

UN experts are urging for decisive international action, like sanctions and an arms embargo, against Israel following its assault on Rafah in Gaza. Despite the US State Department downplaying it, the attack caused casualties, displacing many. Save the Children reported over 60 deaths, including women and children, in attacks on supposed safe zones. UN agencies highlighted the dire situation, with thousands fleeing the ongoing violence in Rafah.

These geopolitical risks increase uncertainty in financial markets, driving investors toward assets like gold, which is traditionally considered a safe haven.

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

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) is currently priced at $2340.955, down 0.04%, indicating a slight decline in market sentiment.

The pivot point, marked by the green line, stands at $2351.55. Immediate resistance levels are at $2367.11, $2380.52, and $2392.98. On the downside, immediate support is found at $2326.59, with further supports at $2307.51 and $2286.08.

The 50-day Exponential Moving Average (EMA) is at $2360.85, suggesting potential resistance. The Relative Strength Index (RSI) is at 43, indicating a moderately bearish momentum. These indicators highlight that gold is currently facing selling pressure below the pivot point of $2351.55.

For traders looking to capitalize on this trend, an entry price is recommended below $2350, with a take profit target set at $2325. A stop loss should be placed at $2366 to manage risk. In conclusion, Gold (XAU/USD) is under pressure below the pivot point of $2351.55, with technical indicators supporting a bearish outlook.

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