Gold Price Forecast: XAU/USD bulls stay on top, but bears lurking at daily resistance
- Gold is making headway into key daily resistance.
- Risk sentiment is sour and supportive of the yellow metal.
The gold price has been moving higher on Tuesday as the US dollar gave way to the bears yet again, sliding to a one-month low following hawkish rhetoric from the European Central Bank President Christine Lagarde. The governor said the eurozone interest rates will likely be in positive territory by the end of the third quarter. Consequently, the markets moved out of the greenback and spread the demand across its rivals.
Against a basket of other major currencies (DXY), the dollar was down 0.362% at 101.646, its lowest since April 25. The greenback also weakened further after data showed US business activity slowed moderately in May. S&P Global said its flash US Composite PMI Output Index, which tracks the manufacturing and services sectors, showed the pace of growth was the slowest in four months. US New-Home Sales also slowed to a 591,000 annual rate in April from a downwardly revised 709,000 rate in March, below the 749,000-rate expected.
Additionally, negativity returned to risk markets and major equity market indexes ended mixed Tuesday as Snap (SNAP) said it expects second-quarter revenue to miss its own guidance. The Dow Jones Industrial Average managed to end 0.2% higher at 31,928.62. The S&P 500 declined 0.8% to 3,941.48 while the tech-heavy Nasdaq Composite fell by 2.4% to 11,264.45. Investors moved into bonds instead and this sent the US 10-year yield lower by 10.1 basis points to 2.76% after reaching its lowest intraday level since mid-April earlier in the session.
Gold supported on growing economic concern
''Gold traders are increasingly questioning the Fed's willingness to hike into a recession, as growing economic concern is breathing life into the gold market. Upside flow from CTAs along with renewed growth in ETFs have supported the recovery,'' analysts at TD Securities argued.
''In turn, the improving momentum has seen the nearest trigger within trend-following models flip toward further upside should prices break north of $1900/oz, rather than a whipsaw lower. Nonetheless, the recovery in the yellow metal is still on shaky ground as Fed Chair Powell signalled a willingness to sacrifice some economic growth in an effort to tame inflation, suggesting the Fed is comfortable with more pain before taking the foot off the break, which should ultimately still weigh on precious metals.''
Gold technical analysis
Gold is trapped between daily support and resistance still but is making headway. However, the W-formation is a reversion pattern that could leave the price trapped in the sideways channel for the days ahead. If, however, there is a break one way or the other, of the current support and resistance, then the price imbalances to $1,883 on the upside and $1,780 to the downside could be mitigated.