In the face of a stronger US Dollar (USD), the price of gold (XAU/USD) managed to reclaim some lost ground on Friday. Despite growing expectations of the US Federal Reserve (Fed) holding off on a rate cut in September, the precious metal saw a resurgence, buoyed by safe-haven flows amidst escalating geopolitical tensions in the Middle East.
Investor focus is now keenly set on the Federal Reserve’s communication. With Fed member Waller scheduled to address the public on Friday, any hawkish sentiment expressed could further dampen the appeal of gold. Historically, a more aggressive stance from the Fed tends to exert downward pressure on gold prices, as it elevates the opportunity cost of holding the metal.
Additionally, market attention remains attuned to key economic indicators such as the US Durable Goods Orders and the Michigan Consumer Sentiment Index, which are poised to influence gold’s trajectory.
Technical Analysis Points to Resilient Bullish Trend Despite Bearish Signals
From a technical standpoint, the bullish momentum of gold remains resilient, as evidenced by its positioning above the critical 100-period Exponential Moving Average (EMA) on the daily chart. However, concerns arise from the emergence of a bearish divergence pattern, observed as the price of gold recorded higher highs on May 20, while the Relative Strength Index (RSI) formed lower highs. This phenomenon suggests a potential slowdown in momentum, raising the possibility of a corrective phase or consolidation in price action.
In terms of immediate resistance, the upper boundary of the Bollinger Band at $2,428 stands as a significant barrier for XAU/USD. A decisive breach above this level could pave the way for a renewed ascent towards the all-time high of $2,450, with the psychological threshold of $2,500 looming thereafter.
Conversely, the downside trajectory could find initial support at the May 13 low of $2,285, followed by a potential descent to the lower limit of the Bollinger Band at $2,267. Further downside pressure might bring into play the 100-period EMA support level at $2,217.
In conclusion, while the gold market navigates through a landscape marked by a hawkish Fed stance and geopolitical uncertainties, technical indicators suggest a cautious outlook, with attention drawn to key support and resistance levels for further guidance on price movements.
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