Gold Bulls Seek Direction After Data Hints at Fed Pivot

Gold prices (XAUUSD) are buoyed by renewed optimism around potential interest rate cuts from the Federal Reserve later in 2024. This follows weaker-than-expected US job growth data released on Friday, which reinforces expectations of a dovish shift by the Fed. Geopolitical tensions in the Middle East, with the ongoing conflict between Israel and Hamas, are also adding to the safe-haven appeal of gold. The Perth Mint reported a significant jump in gold sales in April, indicating increased physical demand. 

However, some headwinds remain. Recent data suggests sluggish physical demand in India, a key gold-consuming nation. Additionally, gold faces headwinds as the US dollar remains relatively strong. 

Technical Analysis 

The 4-hour chart shows that gold is currently trading at $2,318.20/ounce, attempting to recover after closing the previous two weeks in the red. The price action is currently above the 50-SMA (blue line) and around the 20-SMA (green line) but remains below the 100-SMA (orange line). 

The upward-sloping RSI (54.77) recently broke above the 50 level, indicating a potential shift in momentum. A sustained push above the 38.20% Fibonacci retracement level ($2,322.45/ounce) could see gold target the 23.60% Fibonacci retracement level ($2,364.12/ounce). Overcoming this resistance could even bring the all-time high of $2,431.47/ounce into play. 

Conversely, failing to hold above the 20-SMA could trigger a retracement towards the 50.00% Fibonacci retracement level ($2,288.77/ounce). A significant break below this level, coupled with high volume, could strengthen the bearish momentum. In this scenario, the 61.80% Fibonacci extension level ($2,255.10/ounce) and the 78.60% Fibonacci extension level ($2,207.15/ounce) could become targets. 


Market sentiment around gold is cautiously optimistic. The prospect of Fed easing and ongoing geopolitical tensions are supportive factors. However, a wait-and-see approach prevails as investors await further data and cues from the Fed. Technically, a confirmed breakout above the 38.20% Fibonacci retracement level could signal a bullish resurgence. Conversely, a breakdown below the 50.00% Fibonacci retracement level could indicate a short-term correction.  

Sources: TradingView, Trading Economics, Reuters, MarketWatch. 

Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst 

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