The Gold Spot Price (XAUUSD) has recently embarked on an upward trajectory, although it has encountered resistance at a significant technical level, as represented by the Fibonacci Retracement Golden Ratio.
Despite this, the price is trading 50 basis points lower month-to-date, signalling the potential for back-to-back months of losses. The Dollar’s recent strength has exerted pressure on the yellow metal, buoyed by robust domestic economic data and the Federal Reserve’s stance on monetary policy. Further boosting the Greenback has been shifting sentiments surrounding the monetary policy outlook. According to the CME FedWatch Tool, the first rate cut is anticipated in June, after markets ruled out cuts in March and May.
This week, attention turns to pivotal economic indicators, notably the eagerly awaited release of the PCE Price Index, the Federal Reserve’s preferred inflation gauge that could influence its monetary policy outlook. Additionally, upcoming data such as the U.S. GDP Growth Rate and Jobless Claims, along with insights from Federal Reserve Governors’ speeches, are anticipated to wield significant influence over market conditions in the near term.
Technical
The Gold Spot Price has recently experienced a notable shift in market dynamics, initially trading below the 100-day moving average, indicating a downtrend.
Initially, a selloff was initiated at the 2065.42 resistance level, driven by overbought RSI conditions, fuelling the downtrend. Subsequently, buying activity emerged after the market found support at 1984.24 amid oversold RSI conditions, leading to a convergence with and cross over above the 100-day moving average, suggesting a potential sentiment shift favouring the upside.
Currently, trading at the 61.80% Fibonacci Retracement Golden Ratio, overbought RSI conditions may cap upside potential, with a possibility of a reversal if downside momentum intensifies. In such a scenario, the 50% level could act as a short-term downside target, while sustained downside momentum might lead to a retest of the 1984.24 support level. Conversely, if buying activity persists, a retest of the 2065.42 resistance level remains plausible, indicating an ongoing battle between bulls and bears in shaping market sentiment.
Summary
In conclusion, the Gold Spot Price faces resistance at the Fibonacci Retracement Golden Ratio, with the potential for back-to-back monthly losses. Overbought RSI conditions at the 61.80% level may limit the upside gains, while support at 1984.24 and resistance at 2065.42 signify potential points of interest.
Sources: CME, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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