Published on May 25, 2023

Daily Analysis For GOLD (XAU/USD) 25-05-2023

Gold (XAU/USD) Analysis

Key Points

• The price of gold remains at a lower level, testing the lower boundaries of a significant trading range in the short term.

• The strengthening yields of US Treasury bonds and the stability of the US Dollar limit the demand for gold (XAU/USD) as a safe-haven asset during uncertain market conditions.

• Mixed sentiments regarding the US debt ceiling deal and the Federal Reserve's actions impose restrictions on the movements of the gold price.

• Market participants are closely observing US economic data and potential risk factors that could provide clearer indications and guidance. US negotiators are preparing for an extended weekend, which adds to the cautious sentiment.

Today's Scenario: - The price of gold (XAU/USD) is experiencing a lack of clear direction as buyers and sellers contend near a significant short-term support level, approaching the $1,955 mark as Thursday's European session unfolds. This indicates the market's uncertainty amidst conflicting signals surrounding the negotiations on extending the US debt limit and the actions of the US Federal Reserve (Fed). Additionally, traders of XAU/USD are likely to be influenced by a cautious sentiment ahead of upcoming mid-tier data releases from the US.

The inability of US policymakers to reach an agreement on extending the debt ceiling, coupled with the impending long weekend for the House of Representatives, has increased concerns about a potential US default, despite signs of progress in the latest negotiation rounds. Consequently, global rating agencies like Fitch and Moody's have adopted a cautious stance on the US credit rating, a sentiment that has been acknowledged by the US Treasury Department.

Meanwhile, the Minutes of the recent Federal Open Market Committee (FOMC) meeting indicate a division among policymakers regarding the recent 0.25% interest rate hike by the US central bank. This uncertainty has led to doubts in the market about the likelihood of another rate hike in June. However, Atlanta Fed President Raphael Bostic noted that the country is just beginning the challenging phase of managing inflation. Similarly, Federal Reserve Governor Christopher Waller expressed his support for continuing rate hikes unless there is clear evidence that inflation is moving towards the 2% target.

On another note, the market's anticipation of further easing measures from China, evidenced by record-high interbank Repo turnover, contrasts with geopolitical concerns, creating challenges for movements in the price of gold.

Reflecting the overall sentiment, the S&P 500 Futures have halted a two-day downtrend, rebounding from a two-week low to reach 4,138 at the time of writing, representing a 0.39% intraday increase. Meanwhile, the yields of the US 10-year and two-year Treasury bonds remain relatively strong, hovering near their highest levels since mid-March, at approximately 3.75% and 4.40% respectively.

Looking ahead, the market will be closely monitoring key events such as the US weekly Jobless Claims, the Chicago Fed National Activity Index, and Pending Home Sales. However, the outcome of the debt ceiling talks will be crucial in providing clearer directions for market participants.

Diagram of XAU/USD (Gold)

Economic Events :-

GMT	Event	Impact	Currency
00:01	(United Kingdom) Car Production YoY	Low	GBP
00:50	(Japan) Foreign Bond Investment	Low	JPY
00:50	(Japan) Stock Investment by Foreigners	Low	JPY
01:00	(Australia) RBA Payments System Board Meeting	Low	AUD
04:35	(Japan) 40-Year JGB Auction	Low	JPY
07:00	(Germany) GDP Growth Rate QoQ	Medium	EUR
07:00	(Germany) GDP Growth Rate YoY	Medium	EUR
07:00	(Germany) GfK Consumer Confidence	High	EUR
07:45	(France) Business Confidence	Medium	EUR
07:45	(France) Business Climate Indicator	Low	EUR
08:00	(Spain) PPI YoY	Low	EUR
09:30	(Slovenia) Tourist Arrivals YoY	Low	EUR
09:30	(Slovenia) Business Confidence	Low	EUR
10:00	(Euro Area) ECB Annual Report 2022	Low	EUR
10:00	(Euro Area) ECB Guindos Speech	High	EUR
10:10	(Italy) BTP Short Term	Low	EUR
11:00	(United Kingdom) CBI Distributive Trades	Medium	GBP
11:00	(Latvia) Unemployment Rate	Low	EUR
12:00	(Canada) CFIB Business Barometer	Low	CAD
13:30	(Canada) Manufacturing Sales MoM	Low	CAD
13:30	(United States) Jobless Claims 4-week Average	High	USD
13:30	(United States) Continuing Jobless Claims	High	USD
13:30	(United States) Initial Jobless Claims	High	USD
13:30	(United States) Chicago Fed National Activity Index	Medium	USD
13:30	(United States) Real Consumer Spending QoQ	Low	USD
13:30	(United States) GDP Sales QoQ	Low	USD
13:30	(United States) Core PCE Prices QoQ	Low	USD
13:30	(United States) PCE Prices QoQ	Low	USD
13:30	(United States) GDP Price Index QoQ	Medium	USD
13:30	(United States) Corporate Profits QoQ	Medium	USD
13:30	(United States) GDP Growth Rate QoQ	Medium	USD
13:30	(Canada) Average Weekly Earnings YoY	Low	CAD
15:00	(United States) Pending Home Sales YoY	Medium	USD
15:00	(United States) Pending Home Sales MoM	Medium	USD
15:30	(United States) EIA Natural Gas Stocks Change	Low	USD
15:30	(United States) Fed Collins Speech	Medium	USD
16:00	(United States) Kansas Fed Composite Index	Low	USD
16:00	(United States) Kansas Fed Manufacturing Index	Low	USD
16:30	(United States) 8-Week Bill Auction	Low	USD
16:30	(United States) 4-Week Bill Auction	Low	USD
17:30	(United Kingdom) BoE Haskel Speech	Low	GBP
18:00	(United States) 7-Year Note Auction	Low	USD
23:00	(New Zealand) ANZ Roy Morgan Consumer Confidence	Low	NZD

Buy Scenario: - The price of gold is currently testing a week-old ascending support line around the $1,955 level, while it remains within a short-term trading range that has been established since May 16. The range is currently bounded by the levels of $1,985 and $1,951.

Despite this, there are some factors that support the buyers of XAU/USD, including the potential for a bullish crossover on the MACD indicator and the RSI (14) line currently being below the 50 level.

However, there are two key obstacles that may hinder immediate upward movements for the gold price. Firstly, there is a declining trend line that has been in place for about two weeks, situated around the $1,977 level. Additionally, the 200-Hour Moving Average (HMA) at approximately $1,981 may also act as a resistance level. Till we did not advise to buy XAU/USD.

Selling Scenario: - It's important to note that there are additional factors to consider in relation to the gold price. The late March swing low, located around $1,934, and the psychological level of $2,000 can serve as additional filters that could impact the movements of the gold price.

Overall, gold prices are consolidating recent gains in a market that lacks significant momentum. However, bearish sentiment persists among some market participants. We do not advise selling XAU/USD.

Support and Resistance Level: -