Gold price (XAU/USD) has found support around the $2,317 level during the Asian session on Monday, halting its decline from a recent two-week high reached on Friday. There is increasing anticipation that the Federal Reserve (Fed) will begin lowering interest rates starting in September, influenced by signs of easing inflationary pressures, which supports the non-yielding yellow metal. Additionally, a cautious risk sentiment, ongoing geopolitical tensions, and political uncertainty in Europe are bolstering demand for the safe-haven asset.
However, stronger-than-expected US PMI data released on Friday indicated resilience in the economy. Coupled with the Fed's unexpected hawkish stance earlier in the month, projecting only one rate cut in 2024, this is bolstering the US Dollar (USD) and could cap significant upward movement in the price of Gold. Traders may opt to wait on the sidelines ahead of key economic releases this week, including the final US Q1 GDP figure and the Personal Consumption Expenditures (PCE) Price Index, before committing to new trading directions.
Technical Analysis: Gold price has managed to hold above a short-term ascending trend-line support
From a technical standpoint, Friday's decline can be seen as a failed attempt to break above the 50-day Simple Moving Average (SMA) resistance. The subsequent retreat, however, found support near a two-week-old ascending trend-line, currently positioned around $2,312, marking a crucial level. With daily chart oscillators just beginning to trend into negative territory, a decisive drop below this support could expose Gold to further downside, potentially testing the monthly low near $2,285. Continued selling pressure might then target the 100-day SMA support zone around $2,247-2,246, with further potential declines toward the $2,225-2,220 range before potentially reaching the $2,200 mark.
Conversely, the 50-day SMA, situated near $2,341-2,342, is likely to serve as strong resistance in the near term, followed by Friday's peak around $2,368-2,369. Continued buying momentum could propel Gold towards intermediate hurdles near $2,387-2,388 and potentially back towards the $2,400 level. Sustained strength above this point would invalidate the short-term bearish outlook, opening the door for a retest of the all-time high around $2,450 established in May.
Paraphrasing text from "FX Street" all rights reserved by the original author.
