The Gold Spot Price (XAUUSD) has been under the spotlight recently as it shows signs of a potential rebound this week after enduring back-to-back weeks of losses.
Despite trading slightly higher by 35 basis points week-to-date, the precious metal has relinquished just over 1% gains. This downward pressure can be attributed to the strength of the Greenback, which initially gained traction due to a robust labour market and higher-than-expected inflation figures at 3.1%, diminishing prospects of a rate cut in May.
As reflected by the CME FedWatch Tool, market sentiment now indicates a reduced probability of a rate cut in May, dropping to 22% from 51% a month ago. Furthermore, the Dollar received a boost following the release of the latest FOMC minutes, which reinforced expectations of prolonged higher interest rates.
Technical
The Gold Spot Price faced a setback during Thursday’s trading session, marking its first daily loss following a notable five-day winning streak.
Despite this, there are indications of a potential shift in sentiment favouring the upside, as the spot price has converged with the 100-day moving average. A support level was established at 1984.24 after an upsurge from oversold RSI conditions. However, while resistance at 2065.42 remains distant from the current price, the spot price has retraced toward the 61.80% Fibonacci Retracement Golden Ratio.
Attempts to breach this level were met with selling pressures amid overbought RSI conditions. Should a sustained reversal occur, the 1984.24 level could become a significant point of interest to the downside. Conversely, a high-volume breakthrough above the Golden Ratio could indicate bullish appetite, potentially leading to a retest of the 2065.42 resistance level.
Summary
In summary, the Gold Spot Price faces challenges amid Dollar strength but shows resilience near the 100-day moving average. While encountering resistance at 2065.42, a breach of the Golden Ratio could signal bullish momentum. Conversely, a reversal might target the 1984.24 support level, reflecting ongoing market volatility.
Sources: U.S. Bureau of Labor Statistics, CME, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
