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Gold failing at the 200 daily SMA

Gold Price Forecast – Upward Channel Supports, Weaker Dollar Triggers Buy!

Posted Tuesday, May 18, 2021 by
Arslan Butt • 3 min read

During Tuesday’s Asian trading session, the yellow metal gold increased its previous four-day positive performance. It drew some further bids around well above the mid-$1,800 level as optimism over the global economic recovery declined after the latest rise in coronavirus cases in parts of Asia, which acted as a rollercoaster for safe haven assets. Apart from this, the prevalent negative bias surrounding the U.S. dollar was also seen as one of the critical factors that lend some additional support to the dollar-denominated commodity (gold).

The U.S. dollar was being pressured by the sluggish U.S. data, which helps Federal Reserve keep easy money policies. Furthermore, the ongoing US-China tussles and the continuation of Gaza tension keep testing the upbeat market mood, which were seen as other critical factors that boost the safe haven yellow metal prices. On the other side, the overall market upbeat mood, backed by the optimism surrounding the coronavirus (COVID-19) vaccine, becomes one of the key factors that kept the lid on any additional gains in the safe-haven-metal. Besides, the upticks in the GOLD price were also capped by the reports suggesting that the U.S. recently raised a voice for Israel-Palestine peace.

In the meantime, the British reopened their businesses and further eased a four-month COVID-19 lockdown, which also positively impacted the market sentiment. Meanwhile, Spain and France have also eased restrictions, which is seen as a bearish factor for the traditional safe haven assets, including gold. At the particular time, gold is trading at 1,870.81 and consolidating in the range between 1,865.35 and 1,873.51. Despite the long-lasting US-China conflict and the continuation of Gaza tension, as well as worsening virus conditions, the market trading sentiment managed to stop its previous-day bearish performance and started to flash green on the day as the optimism surrounding the coronavirus (COVID-19) vaccine helped the market trading sentiment to offset the worsening virus reports. As per the latest report, U.S. President Joe Biden has shown readiness to share the U.S. authorized COVID-19 vaccine, approximately 20 million doses, with the impoverished nations. In addition, the Dragon Nation supports the global drive to abandon vaccine patents and fasten cure production. Moreover, the optimism over the coronavirus (COVID-19) vaccine was further escalated after reports suggesting that the COVID-19 doses from Pfizer and Moderna can cure the Indian variant of the virus, which offers some additional support to the market trading sentiment.

Besides, the gains in the S&P 500 Futures were further bolstered after U.S. President Joe Biden pushed for a ceasefire between Israel and Palestine. This has happened after U.S. President Joe Biden faced massive pressure from lawmakers in his own Democratic Party to play a more vocal role. In addition, the reason for the upbeat market mood could also be tied to the report suggesting that the United Kingdom reopened businesses and further eased a four-month lockdown. At the same time, France and Spain have also eased restrictions. However, the prevalent buying bias surrounding the market sentiment was seen as one of the key factors that kept the lid on any additional gains in gold.

At the USD front, the broad-based U.S. dollar failed to stop its early-day bearish performance and remained sour on the day as investors increased their bets that the U.S. Federal Reserve would not hike interest rates anytime soon. The sluggish U.S. data raised probabilities that the Fed will keep interest rates low for an extended period, which in turn weighed on the safe-haven U.S. dollar and extended some support to the dollar-denominated commodity. Meanwhile, the overall market upbeat mood, backed by the optimism surrounding the coronavirus (COVID-19) vaccine, also played its major role in undermining the safe-haven U.S. dollar. Therefore, the losses in the U.S. dollar were seen as one of the key factors that helped the bullion prices to stay positive as the price of gold is inversely related to the U.S. dollar.

Alternatively, the worsening coronavirus condition in Asia, especially in India, keeps testing the market risk-on mood, which was understood as another key factor that boosts the gold prices. Apart from this, the US-China tussles and the continuation of Gaza tension have been trying to restrict the market’s upbeat mood, at least for now, which may provide extra support to the bullion prices. Moving on, the market traders will keep their eyes on Wednesday’s Federal Open Market Committee (FOMC) minutes. Apart from this, the trade/political headlines will entertain markets.

Gold - XAU/USD Chart

Gold – XAU/USD Daily Support and Resistance

S3 1810.69
S2 1835.1
S1 1850.5
Pivot Point 1859.51
R1 1874.91
R2 1883.92
R3 1908.33

On the technical front, the GOLD is trading strongly bullish at 1,870 level. On the higher side, gold is likely to face resistance at 1,876 level and support at 1,864 level. In the 4-hour timeframe, it has closed an upward channel supporting bullish bias and suggesting increasing bullish trend continuation. The indicators like RSI and MACD support a bullish trend. Therefore, we should consider taking a buying trade over 1,865 level and selling trade below the same. Good luck!

 

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