Gold Technical Analysis: Prices Head Towards New Buying Levels

XAU/USD Gold Futures fell during the quiet Memorial Day holiday session. With the US markets closed, the yellow metal was trading relatively flat as it tried to recoup its losses last week after falling 1.4%. However, some analysts are confident that XAU/USD gold prices can recover as there is still a lot of uncertainty across the US economy and global financial markets. XAU/USD gold price rebounded towards the level of 1950 dollars an ounce, then moved back in its downward path towards the support level 1941 dollars an ounce, in the beginning of trading today, Tuesday.

All in all, XAU/USD is on track for a monthly loss of around 2% and trimming its year-to-date gains to close to 6%. In the same performance, the price of silver, the sister commodity to gold, is trying to stay above $23. Silver futures fell to $23.345 an ounce. The price of the white metal also fell nearly 2% last week and is heading for a monthly decline of around 8%. From the beginning of the year 2023 to date, the percentage has decreased by more than 3%.

All in all, XAU/USD gold prices have been on a downward trajectory since hitting a new record high earlier this month. The price of the precious metal reached an all-time high of $2069 in August 2020. It touched a high of $2055 an ounce on May 4. Since then, the next month contract has held below the psychologically crucial $2,000 level for 10 consecutive trading sessions.

Now that the US debt ceiling drama appears to be over - a vote will be held on May 30 - and banking turmoil may have subsided, the main focus for gold investors will be on the US Federal Reserve. According to CME FedWatch, the futures market is pricing in a rate hike at the Federal Open Market Committee (FOMC) meeting next month. With inflation accelerating in April, traders believe the US central bank will pull the trigger to raise interest rates again.

As it is well known, the gold market is sensitive to interest rate movements because it affects the opportunity cost of owning non-returnable bullion.

Meanwhile, the US currency has strengthened, affecting precious metals. The US Dollar Index (DXY), a measure of the greenback against a basket of other major currencies, rose to 104.28, from an opening of 104.21. The index posted a weekly gain of 1.05% and is on track for an increase in May of around 2%. And year-to-date in 2023, it has increased by approximately 1%.

As is well known, a strong dollar is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to buy.

Moreover, a weaker economy could support gold prices, commenting on this. “This is positive for gold because a weaker economy causes investors to turn to gold, and because lower rates make gold more attractive to own,” said Imaro Casanova, Gold and Precious Metals Portfolio Manager at VanEck. . And she said, “The long-term effects of the Fed’s pause on inflation expectations could also support gold,” and given the questions about whether inflation will remain high, she said, as gold is considered a hedge against inflation.

In other metals markets, copper futures fell to $3.6725 a pound. And platinum futures contracts rose to 1034.40 dollars an ounce. Palladium futures fell to $1,420.00 an ounce.

Gold price forecast today:

  • The general trend of the XAU/USD gold price is still bearish.
  • The bulls will not have the opportunity to control the trend without returning to the vicinity of the psychological resistance level of $2000 an ounce again.
  • This requires stopping the gains of the US dollar in the event that the US job numbers came in below expectations.
  • Momentum stalled on expectations of a US rate hike.

On the other hand, if these figures are supportive of the bank's tightening policy path, the bears may find the opportunity to move towards stronger support levels at 1917 and 1900 dollars, respectively.

Ready to trade our Gold price forecast? We’ve made a list of the best Gold brokers worth trading with.

Gold

Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.