On Thursday, the price of gold (XAU/USD) exhibited a positive trend, with investors eagerly anticipating fresh catalysts amidst a lack of significant economic data releases mid-week. However, despite this positive momentum, several factors, including a stronger US Dollar (USD) and hawkish commentary from the US Federal Reserve (Fed), are anticipated to limit the precious metal’s potential gains in the near future.
The latest report from the World Gold Council (WGC) highlights that the growth in global gold demand was primarily fueled by robust investment activity in the over-the-counter market, consistent purchasing by central banks, and increasing demand from key Asian markets such as China and India. Moreover, the prevailing risk-averse sentiment coupled with geopolitical tensions in the Middle East are expected to bolster the appeal of traditional safe-haven assets like gold.
Investors are now eagerly awaiting potential market-moving events. Among these, the release of the US weekly Initial Jobless Claims data on Thursday holds significant importance. Additionally, remarks from San Francisco Fed President Mary Daly, known for her dovish stance within the central bank, are anticipated later in the day. Any dovish commentary from Fed officials could serve to mitigate the downside risks for gold prices in the short term.
In terms of technical analysis, the long-term outlook for gold remains optimistic, with XAU/USD trading above the key 100-day Exponential Moving Average (EMA) on the daily chart. However, in the near term, gold prices have been confined within a descending trend channel since mid-April. The 14-day Relative Strength Index (RSI) hovering around the 50-midline underscores the ongoing consolidative theme.
Key support levels for gold are identified near the psychological mark of $2,300, followed by the lower boundary of the descending trend channel at $2,260. Further downside movement could potentially lead XAU/USD to test the April 1 low of $2,228, with the $2,200 level serving as another crucial support level.
Conversely, if demand for gold strengthens, the precious metal could target the May 6 high of $2,232. Beyond this, upward momentum may see gold prices testing the upper boundary of the descending trend channel around $2,345. Notably, the $2,400 level and the previous all-time high near $2,432 represent significant upside targets, contingent upon sustained buying interest in the market.