The shine came off Gold (XAU/USD) this week, with prices barely clinging to the $2,300 mark. This lackluster performance unfolded despite relatively calm markets following the Federal Reserve’s dovish policy announcement and a disappointing U.S. jobs report.
Many analysts were blindsided by bullion’s retreat. They expected a surge on the back of plummeting U.S. bond yields. Fed Chair Powell, however, doused any hopes of renewed rate hikes, hinting at potential cuts instead, despite lingering inflation concerns. This dovish pivot fueled optimism, sending investors sprinting towards riskier assets and leaving safe havens like gold in the dust.
Even a weaker-than-expected U.S. jobs report, reinforcing expectations of the Fed easing monetary policy, couldn’t lift the precious metal’s spirits. The previously reliable inverse relationship between gold and interest rates seems to have frayed this year, with both climbing in tandem earlier in 2024.
Technical Overview on the Gold Market (XAU/USD)
May began with a flicker of bullish sentiment as Gold traders entered the market near a low of $2,283, dipping below the critical support level of $2,300. This level has acted as a boundary, keeping prices within a range of $2,300 and $2,400 since April.
April saw bullish dominance, with prices reaching a peak of $2,436 on April 12th. However, Gold bears gained control towards month-end, pushing the market slightly below the crucial $2,300 support. A brief bullish response brought prices back above this level, but renewed bearish pressure has pushed them back to the threshold.
Technical indicators, including Bollinger Bands and the Relative Strength Index (RSI), currently suggest a market in equilibrium, trading sideways. However, the Bollinger Bands, while illustrating a sideways range between $2,300 and $2,400, also show a divergence in the lower standard deviation curve, potentially hinting at increasing bearish momentum.
For the bears to truly challenge the bull market, a sustained breach of the $2,300 support is crucial. A breakdown at this level could lead to a sharper price decline, potentially pushing prices below $2,200.
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