Gold (XAU/USD) price dropped by over 2% for the second week in a row. It managed to recover a bit of its losses but then faced more downward pressure. Looking ahead, the short-term view suggests that the bullish momentum is weakening as attention turns to speeches from Federal Reserve officials.
Gold Ends Choppy Week in Negative Territory
Gold didn’t change much on Monday but then went down on Tuesday, reaching its lowest level in over three weeks. This drop happened because a report in the US showed that wages went up more than expected. This made US government bonds more appealing, so people sold gold and bought those bonds instead. Also, the US dollar got stronger because of news that the Federal Reserve might not raise interest rates as soon as people thought.
On Wednesday, the Federal Reserve said they’re keeping interest rates the same, just as expected. They also mentioned they’ll slow down how much they’re reducing their balance sheet, which is like a record of all the money they’ve lent out. This change will start in June.When the head of the Federal Reserve, Jerome Powell, talked to reporters after the meeting, he said it’s unlikely they’ll raise interest rates next. He didn’t say exactly when they might do it, but he did say it might take longer than they thought to be sure that prices are going up at the right pace. This made investors less worried that rates might go up soon, so they felt better about buying gold again. Also, the Bank of Japan did something similar to what the Federal Reserve did, which made the US dollar weaker against other currencies. So, the value of gold in dollars went up, and it climbed back above $2,300.
After the US dollar went down earlier in the week, it bounced back on Thursday when a report showed that wages went up by a lot in the first part of the year. This made gold prices stop rising, but later in the day, as investors became more willing to take risks, the dollar weakened again, and gold ended up a bit higher, above $2,300.
On Friday, a report came out saying that the number of jobs added in April was lower than expected. Also, the unemployment rate went up slightly, while the percentage of people actively looking for work stayed the same. Wage growth was also lower than what experts predicted. Despite this news showing a weaker job market, gold didn’t attract many investors because people were still feeling positive about taking risks in the financial markets as the weekend approached.
Gold Investors Turn Their Attention to Federal Reserve Communication
Next week, there won’t be any big news from the US that could strongly affect how much gold is worth. But on Thursday, people will be watching closely to see how much money China made from trading with other countries in April. If China made more money than expected, gold prices might go up because it could mean that more people want to buy gold.
Also, investors will pay attention to what officials from the Federal Reserve, the central bank of the United States, say next week. Right now, there’s a bit more than a 50% chance that the Fed might change its policies in September. If Fed officials hint that they might lower interest rates in September, it could make the US dollar less valuable, which might help gold prices go up. But if they say they’re more likely to lower rates later in the year, it could make it hard for gold prices to go up. However, the Fed will have more information to consider before September, so they might not give clear hints about what they’ll do.
Assessing the Technical Landscape for Gold
The indicators show that gold might go down in the short term. The Relative Strength Index (RSI), which measures how strong or weak a price trend is, dropped below 50, suggesting a bearish trend. Also, the last five days of gold trading closed below the 20-day Simple Moving Average (SMA), which is another sign of a possible downturn.There’s a key level at $2,300 where the price might struggle to go above, called a resistance level. If gold keeps facing resistance at this level, people who use technical analysis might sell their gold. If this happens, the price could find support, or a floor, around $2,280 first, then at $2,245, and $2,235. These are levels where the price might stop falling temporarily, according to the Fibonacci retracement, which is a tool used to predict where prices might go based on past movements.On the other hand, if gold manages to go above $2,300 and stay there, it might find more buyers. In that case, the next levels where the price might struggle to go higher, called resistance levels, could be around $2,340, $2,360, and $2,400. These levels are where the price might face more selling pressure.
