The price of gold has experienced a recovery, nearing the $1,950.00 mark, primarily driven by a sharp decline in the USD Index. Investors appear to be disregarding concerns related to potential interest rate hikes by the Federal Reserve (Fed). Currently, the gold price is hovering around the upward-sloping trendline of the Ascending Triangle chart pattern, indicating a potential upward movement.
Following a decline to approximately $1,940.00, the XAU/USD pair initiated a rebound, reaching nearly $1,950.00 as the US Dollar Index (DXY) experienced a significant drop. The broader volatility in the USD Index has kept investors cautious, and a lack of significant triggers this week has confined the USD Index to a narrow range.
The S&P 500 futures have fully recovered from previous losses and turned positive, suggesting a revival in market participants' risk appetite. It appears that investors are beginning to dismiss concerns surrounding the likelihood of additional interest rate hikes by the Federal Reserve.
While the USD Index found intermediate support around 103.80, the situation remains delicate due to the prevailing optimistic market sentiment. Despite a short-term correction, the USD Index is expected to maintain its strength as the Fed is anticipated to continue adopting a hawkish stance.
Moreover, according to a Reuters survey, significant rate cuts by the Federal Reserve would be required to substantially weaken the currency. Additionally, it is expected that the Fed will pause in June for the first time in over a year, keeping its key interest rate within the range of 5.00% to 5.25% for the remainder of the year.
Gold Technical Analysis
On a two-hour scale, plotted from the low of May 30 at $1,932.12, the price of gold is currently hovering near the upward-sloping trendline of the Ascending Triangle chart pattern. The horizontal resistance of the aforementioned pattern is established from the high of May 19 at $1,983.29. Presently, the precious metal is trading below the 50-period Exponential Moving Average (EMA) at $1,955.38, indicating a bearish short-term trend.
Simultaneously, the Relative Strength Index (RSI) (14) is struggling to maintain a position above 40.00.
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