Gold (XAU/USD) Price Forecast: Trading at $2,338 Amid Middle East Tensions and Strong US Data

Despite strong U.S. economic data and a bullish U.S. dollar, the price of Gold (XAU/USD) managed to halt its early-day downward trend and regain traction around the $2,338 level, reaching an intraday high of $2,340.

This upward movement can be attributed to risk-off market sentiment triggered by increasing geopolitical tensions in the Middle East, boosting safe-haven assets, including Gold.

GOLD Price Chart - Source: Tradingview

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Geopolitical Tensions in the Middle East Support Gold Prices

Tensions in the Middle East are contributing to higher demand for gold as a safe-haven asset. Over 900,000 Palestinians have been displaced in two weeks, facing severe shortages of essentials.

Hospitals in Gaza are struggling without fuel, and Israeli forces are advancing, exacerbating the humanitarian crisis. The death toll has surpassed 35,800, with over 80,011 wounded. This heightened geopolitical uncertainty is supporting gold prices.

US Economic Strength and Fed Outlook Drive Gold Price Downward

On the U.S. front, robust economic data has bolstered the US dollar, hinting at the possibility of higher interest rates, consequently putting pressure on Gold prices.

Atlanta Fed President Raphael Bostic highlighted concerns about inflation, suggesting the Fed might delay rate cuts to prevent overheating the economy.

According to the CME FedWatch Tool, the likelihood of the Fed maintaining rates in September rose from 41.9% to 48.4% on May 23rd.

US Initial Jobless Claims dropped by 8,000 to 215,000 for the week ending May 18, beating expectations. The flash US S&P Global Manufacturing PMI rose to 50.9 in May from April’s 50.0, while Services PMI climbed to 54.8 from 51.3. The US S&P Global Composite PMI surged to 54.4 in May from April’s 51.3, marking its highest level since April 2022. These strong data points have pressured Gold prices lower.

Gold Price Forecast: Technical Outlook

Gold (XAU/USD) is currently trading at $2,338.97, up 0.21%. The technical outlook suggests a bullish trend as the price is positioned above the pivot point of $2,326.84.

Immediate resistance is observed at $2,352.61, with subsequent resistance levels at $2,368.37 and $2,392.98. On the downside, immediate support is noted at $2,307.23, followed by $2,291.85 and $2,277.62.

GOLD Price Chart

The Relative Strength Index (RSI) is currently at 31, indicating that gold is approaching oversold conditions, which could suggest a potential reversal or stabilization. The 50-day Exponential Moving Average (EMA) is at $2,386.60, providing significant resistance near the upper levels.

Traders should consider an entry price for buying above $2,327, with a take-profit target of $2,358 and a stop-loss set at $2,307. This strategy leverages the potential for further upside while managing risk.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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