The gold price (XAU/USD) showed strength in trading on Tuesday, despite the US Dollar (USD) consolidating. Investors are showing caution and waiting on the sidelines ahead of key US economic data releases later this week.
The upcoming US economic data releases, including the Producer Price Index (PPI) for April and Federal Reserve Chair Jerome Powell’s speech, are expected to have a significant impact on the gold price. Signs of higher inflation could reduce expectations of US interest rate cuts this year, potentially pressuring the yellow metal.
Market Sentiment
The recent higher-for-longer US interest rate stance has led to some selling pressure on the XAU/USD in previous sessions. However, escalating tensions in the Middle East have boosted safe-haven flows into gold, providing some support to the precious metal.
According to a poll of economists by Reuters, the Federal Reserve is likely to cut the Fed funds rate by 25 basis points in September, with further cuts expected in 2024. This projection has implications for the future trajectory of the gold price.
The technical analysis of the gold price indicates a bullish trend, with the precious metal trading above the key 100-day Exponential Moving Average (EMA) on the four-hour chart. The Relative Strength Index (RSI) also suggests that the support level is likely to hold.
Support and Resistance Levels
In terms of price levels, an immediate resistance level for gold is seen at $2,378, with potential gains pushing the price towards $2,400 and possibly an all-time high near $2,432. On the downside, a critical support zone is identified around $2,325-$2,340, with a breach of this level potentially leading to a decline to $2,281.
The table below displays the percentage changes of the US Dollar against major currencies in the last 7 days. The USD was weakest against the Euro, as shown by the heat map indicating percentage changes of major currencies against each other.
The gold price is reacting to the upcoming US economic data releases, with inflation figures playing a crucial role in shaping market expectations. Investors are closely monitoring the Fed’s stance on interest rates, which will have implications for the future movement of the gold price. Technical analysis suggests a bullish trend for gold, but key support and resistance levels should be monitored closely. The performance of the US Dollar against major currencies also remains a factor influencing the gold price dynamics.