Gold price (XAU/USD) have drop back to around $2,410. This drop is due to central banks worldwide being cautious about lowering interest rates. Higher interest rates usually mean that investors prefer cash or bonds, which can earn them more money. Despite this, worries about conflicts in the Middle East and Ukraine are keeping gold prices from dropping too much. Additionally, central banks in emerging markets, especially in BRICS nations, are buying more gold to protect their reserves from potential sanctions.
Gold Price Declines as Interest Rate Outlook Shifts
Gold price went drop recently because officials from the U.S. and Australian central banks have expressed that they are not planning to cut interest rates. They even mentioned the possibility of raising them instead. Loretta Mester from the Federal Reserve Bank of Cleveland said the Fed might increase rates if prices rise too quickly. She also warned against expecting three rate cuts this year.
This morning, the Reserve Bank of Australia (RBA) discussed their May meeting, where they talked about tightening borrowing rules for the first time in months.
Technical Analysis: Gold Price Retreats, RSI Shows Divergence
Gold price drop from an all-time high of about $2,450 on Tuesday. This decrease followed a Shooting Star candlestick pattern from Monday. This pattern indicates that prices reached a new high but then fell, suggesting they might drop further. If Tuesday ends as a down day, prices could continue to decline.
However, if Tuesday ends on a positive note, it could lessen the impact of the Shooting Star pattern, indicating that prices might rise again.
XAU/USD Daily Chart
The Relative Strength Index (RSI) shows a difference from the price movements on the daily chart. Even though gold prices reached new highs in May, the RSI didn’t increase as much. This could suggest a possible price drop soon.
If prices do fall, gold might find support around $2,360, where a rising trendline exists. Nevertheless, the overall trend for gold looks promising in the short, medium, and long term. The saying “the trend is your friend” suggests that prices are likely to rise again eventually, even if they drop first.
If gold breaks past the recent high of $2,450, it may continue to rise toward the important level of $2,500.
For more insights on the latest market trends, visit Daily Gold Signal and check out their Daily Gold Update.
