May 29

Gold buyers take a breather but technicals stay bullish

Gold price is posting small losses below $2,360, pausing a three-day recovery early Wednesday. The US Dollar resurgence acts as a headwind for the Gold price, despite heigthening Middle East tensions and a pick up in Indian physical Gold demand.

Technical Overview

The short-term technical outlook for Gold price remains more or less the same, as buyers yearn for acceptance above the rising wedge support-turned-resistance, now at $2,372, on a daily closing basis.

Gold price maintains its bullish potential, as the 14-day Relative Strength Index (RSI), sits above the 50 level, currently trading near 52.60.

Adding credence to the upside bias, Gold price closed Tuesday above the key 21-day Simple Moving Average (SMA) resistance at $2,353.  

A sustained move above the abovementioned barrier at $2,372 would provide legs to the ongoing recovery, calling for a test of the next topside barrier at the May 24 high of $2,384.

Further up, a test of the $2,400 mark will be inevitable.

On the flip side, the immediate support is now aligned at the 21-day SMA at $2,353.

Further south, Gold sellers need to crack the 50-day SMA support at $2,323 to sustain the downtrend toward the $2,300 threshold.


Fundamental Overview

The US Dollar found fresh buyers in Tuesday’s American trading, as risk sentiment soured on escalating geopolitical tensions between Israel and Gaza. Meanwhile, hawkish comments from Minneapolis Federal Reserve (Fed) President Neel Kashkari drove US Treasury bond yields, in turn, lifting the Greenback from weekly troughs against its major rivals.

Israeli forces shelled a tent camp in a designated “safe zone” west of Rafah and killed at least 21 people, including 13 women and girls, in the latest mass killing of Palestinian civilians. The UN Security Council convened an emergency meeting over Israel’s ground invasion of Rafah as Spain, Ireland and Norway formally recognized the state of Palestine. Investors flocked to the safety in the US Dollar, curbing the appeal of Gold price as a traditional safe-haven asset.

Meanwhile, Kashkari said in a CNBC interview on Tuesday that the Fed should wait for significant progress on inflation before lowering the policy rate. His hawkish remarks also favored the Greenback.

Amidst easing bets of aggressive Fed interest rate cuts this year driving US Treasury bond yields at multi-week highs, Gold buyers have turned cautious early Wednesday. Traders are keenly awaiting Friday’s US PCE inflation data for further clarity on the timings of the Fed rate cuts, which is expected to have a significant impact on the US Dollar’s performance across its competitors and the Gold price.

Falling Chinese Gold imports also weigh negatively on the Gold price. Last week, China Customs data showed that China-bound shipments of gold for non-monetary use fell 30% in April from the previous month.

The Gold price downside, however, appears capped in the near term, as traders stay hopeful that China’s efforts to prop up the country’s property sector could help revive the economic recovery. The International Monetary Fund (IMF) on Wednesday upgraded China’s Gross Domestic Product (GDP) forecast from 4.6% to 5% in 2024.

Meanwhile, Gold price could also find some dip-buying demand if the Middle East geopolitical tensions escalate, as worldwide the Rafah innocent killing is being condemned.

On the data front, there are no top-tier US economic data, and hence, attention will continue to remain on the speeches from Fed officials. Fed policymakers Williams and Bostic are due to speak later in the North American session. The Fed’s Beige Book will be also published in that session.