Gold Technical and Fundamental analysis

XAUUSD Seeking for a convincing reason

By: Ahura Chalki

Market analyst – IFC Markets

Market volatility since last week has set the investors in an unstable and precarious condition. 

Stocks mostly are trading even overpriced and high prices, making it risky for new investors and positions, especially now, when whispers about tightening monetary policies from FED can be heard, which means more demand for Gold. On the other hand, the last year’s upward trend is so tempting, while higher inflation tells you to avoid holding the cash. 

US Treasury yields are decreasing for the second day in a row, and now it is back under 1.60% at 1.590, while yesterday it was closed at 1.603%. A ten-year Treasury yield under 1.60 is seen for the first time in two-week and sent the US dollar Index to the lowest level since January. Besides weaker USD, a decline in the US Treasury bond yields was seen as a critical factor to support the non-yielding Gold.

As inflation fears decreasing, stock markets get more attention, and we are waiting for another bullish day. And despite disagreements about inflation, FOMC members emphasized holding the current ultra-dovish policy. 

FED speakers, US GDP, and Friday’s PCE will be the key catalysts in the week ahead. At the moment, and while the market fears from higher inflation are decreasing and we can even see the new all-time high in the US stock markets, it must limit the gold bulls and safe-haven demand before Friday’s data.

After all, nothing can be more important than Friday’s US Personal Consumption Expenditure (PCE) Price Index for April, which is expected to rise 3.0% versus 1.8% YoY. The reason is that the price gauge is the Fed’s preferred index for inflation measurement.

Technical analysis

Same as the fundamental analysis, gold prices look mixed from the technical perspective, as well. 

While it is trading in a range, mainly the price movement between the middle and upper line of Bollinger Bands, it technically says that bulls have more chance to confirm themselves than bears. This picture, besides Monday’s “evening Star” pattern, both are helping to believe in an uptrend more than a downtrend. However, RSI is natural at 51. As we can see in the bellow chart, breaching the created range can clear the path for the following targets. 

Gold’s next support and resistance levels sitting at:

Resistance levels: 1887 / 1892 / 1899

Support levels: 1875 / 1869 / 1863

Gold Technical analysis


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