GOLD PRICE, CHARTS AND ANALYSIS:
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READ MORE: Price Action Setups on Gold (XAU/USD)
Gold (XAU/USD) OUTLOOK, FOMC MINUTES, RISING TREASURY YIELDS
Gold prices faded yesterday as a combination of rising US Treasury Yields and a stronger US dollar weighed on the precious metal. The early part of the US session appeared promising as Gold rallied into recent resistance around the $1983-$1985 area, before a sharp decline saw gold prices end the day around the $1957/oz mark. The European Open brought little change evidenced by the currency strength chart below with USD the strongest currency following the market open.
Currency Strength Chart: Strongest – USD, Weakest – NZD.
It’s been real battle for gold of late as bulls and bears continue to jostle for position with no side thus far emerging victorious. Any move seems to be short lived without any follow through, with prices rangebound between the $1950-$2050 handles. Price action on the daily timeframe has been threatening a downside breakout for the last week and a half but the $1950 support area continues to hold firm.
The inability of US policymakers to come to an agreement on the US debt ceiling continues to weigh and keep prices tilting back and forth. Yesterday saw Fitch Ratings Agency place the US ‘AAA’ Long-Term Foreign-Currency Issuer Default Rating (IDR) on Rating Watch Negative. If policymakers needed any further motivation to get a deal done let’s hope this is it. House Rep. Kevin McCarthy did remain rather positive in his remarks during a press conference while ruling out tax increases on the wealthy and confirming that a significant number of concessions have already been made.
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The Federal Reserve minutes release also failed to provide any further clarity on US monetary policy following a host of hawkish comments from policymakers of late. The main takeaways from the minutes being that policymakers do not agree on whether to continue hiking or to pause at this stage. We do obviously have this week’s PCE data and one more CPI print ahead of the Fed’s June’s meeting which could prove key as to Central Banks next policy steps.
There is quite a bit of data on the docket from the US today ahead of tomorrow’s key Core PCE release. A positive reading on the GDP Growth Rate 2nd estimate and a positive jobless claims print could continue to offer the US dollar support and push gold closer to the $1950 support area.
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TECHNICAL OUTLOOK AND FINAL THOUGHTS
Form a technical perspective, Gold price action has been hinting at further downside for a while but has largely been overshadowed by the broader macro picture in play. Yesterday’s shooting star, marubozu candlestick close provide good reason for bears to get excited.
The $1950 handle remains the stumbling block to further downside at this stage with a daily candle close below opening up a potential test of the 100-day MA around the $1935 mark. My skepticism around the move is whether or not such a move can happen without any sort of definite agreement or default on the debt ceiling. There’s a very real possibility that the current short-term range between the $1950-$1985 mark could hold firm until June 1 with price fluctuating as more details around negotiations continue.
Key Intraday Levels to Keep an Eye On
- 1935 (100-day MA)
- 2000 (psychological level)
Gold (XAU/USD) Daily Chart – May 25, 2023
Source: TradingView, Chart Prepared by Zain Vawda
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Written by: Zain Vawda, Markets Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda