Gold prices (XAU/USD) faced continued downward pressure on Wednesday, marking a second consecutive day of decline with the metal hitting its lowest level in over a week during Asian trading hours, according to Arslan Ali, currency and commodity analyst at FX Empire. Despite this decline, Ali noted that gold managed to avoid significant selling pressure.
The decline in gold prices, Ali explained, follows recent hawkish remarks from Federal Reserve officials that have bolstered US Treasury yields and the dollar, thereby restricting potential gains for the precious metal. Federal Reserve Governor Michelle Bowman’s indication of readiness to raise borrowing costs if inflation progress stalls, alongside Fed Governor Lisa Cook’s cautious stance on potential rate cuts amidst strong economic indicators, contributed to this sentiment.
“While weaker consumer and producer prices in May keep a September rate cut plausible, geopolitical tensions in the Middle East and the ongoing Russia-Ukraine conflict are providing some support to gold as a safe-haven asset,” Ali highlighted.
Looking ahead, Ali pointed out that market focus now shifts to upcoming economic data releases, particularly the final Q1 GDP report on Thursday and the Personal Consumption Expenditures (PCE) Price Index on Friday. These data points are expected to offer clearer insights into the Fed’s future policy decisions and their impact on both the US Dollar and gold prices.
In terms of technical analysis, Ali emphasized that the Federal Reserve’s hawkish stance is likely to keep pressure on spot gold prices in the near term. He identified immediate resistance levels at $2329.20 and $2337.78, while highlighting $2310 as a critical support level that could influence market direction.
“The 4-hour chart signals that the pivot point at $2320.06 will be pivotal in determining price movements,” Ali remarked. “Breaking above this pivot could target further resistance levels, whereas a drop below $2310 may lead to significant selling pressure.”
Ali also referenced technical indicators such as the 50-day and 200-day Exponential Moving Averages (EMAs), situated near current price levels, as additional barriers to upward movement. The Relative Strength Index (RSI) at 42 indicates a neutral to slightly bearish sentiment, further influencing market dynamics.
“In conclusion, the outlook for gold remains cautiously bullish above the critical $2310 support level,” Ali summarized.
As of the North American market opening at 9:30 am EDT, spot gold briefly surpassed the $2,300 mark before stabilizing around that level, currently trading at $2,299.25, reflecting a 0.87% loss on the session.
