Baxia Markets
June 05, 2024

Gold Prices Hover Near Multi-Week Low Amid USD Strength and Fed Speculations

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Gold (XAUUSD) remains capped within a narrow descending channel, experiencing notable selling pressure on Tuesday. The precious metal dropped to the $2,316-$2,315 area, edging closer to a multi-week low observed the previous day. This decline was influenced by a modest rebound in the US Dollar (USD), which has been attempting to recover from over a two-month low. However, the USD's recovery lacked substantial follow-through due to increasing expectations that the Federal Reserve (Fed) will begin cutting interest rates later this year, a sentiment bolstered by softer US macroeconomic data.

Geopolitical risks, particularly those stemming from ongoing conflicts in the Middle East, have provided some support to gold prices, driving them back towards the 50-day Eimple Moving Average (EMA). Despite these supportive factors, XAUUSD remains confined within a one-week-old trading range. Investors are exhibiting caution, avoiding aggressive directional bets ahead of crucial US economic data releases, including the highly anticipated Nonfarm Payrolls (NFP) report due on Friday. In the interim, today's US ADP report on private-sector employment and the US ISM Services PMI are expected to offer some impetus to the market.Gold Prices Hover Near Multi-Week Low Amid USD Strength and Fed Speculations

A closer examination of the 1-hour timeframe chart reveals a bearish sentiment for XAUUSD, despite the market's diagonal movement with less aggressiveness. While the price action may appear sideways, it reflects a subdued bearish sentiment, evident from the lack of pronounced lower lows and lower highs. The 50-period Exponential Moving Average (EMA) is positioned below the 200-period EMA, reinforcing the bearish outlook.

The Ichimoku Cloud indicator also aligns with the bearish sentiment. For a bullish signal to emerge, the Tenkan-sen, Kijun-sen, and Chikou Span lines need to rise above the cloud, which has not yet occurred. Thus, medium to long-term indicators suggest a continuation of the bearish trend unless significant bullish signs materialize.

In summary, XAUUSD is experiencing a confluence of factors influencing its current price action. While geopolitical tensions and a potential shift in Federal Reserve policy provide some support, the prevailing bearish sentiment, as indicated by technical analysis, keeps the gold prices within a narrow descending channel. Investors are likely to remain cautious, awaiting key US economic data later this week, which could offer further direction to the market. Until then, the gold market is expected to stay within its current range, reflecting a cautious and bearish outlook.

Key Takeaways

  1. XAUUSD Drops to $2,316-$2,315: Influenced by a modest USD recovery.
  2. Narrow Descending Channel: Gold remains confined within this technical pattern.
  3. Fed Rate Cut Expectations: Softer US data bolsters rate cut speculations.
  4. Geopolitical Tensions: Conflicts in the Middle East provide some support to gold.
  5. Bearish Technical Indicators: EMA and Ichimoku signals suggest a continuing bearish trend.

Key Economic Releases to Watch Today

CAD, Labor Productivity

Forecast -0.2% vs Previous 0.4%

USD, ADP Nonfarm Employment Change 

Forecast 173K vs Previous 192K

USD,  S&P Global Services PMI 

Forecast 54.8 vs Previous 51.3

CAD, BoC Interest Rate Decision

Forecast 4.75% vs Previous 5.00%

USD, ISM Non-Manufacturing PMI

Forecast 51.0 vs Previous 49.4




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