Gold Price Returns Down to the 20 SMA As USD Strength Prevails

The Gold price has been having difficulties resuming the uptrend in the last two weeks. After the record high at $2.450 on May 20, XAU reversed lower and has been trading in the lower half of $2,300s, as global uncertainties keep Gold traders fearful.

Geopolitical uncertainties, particularly in the Middle East, along with central bank demand for gold from BRICS countries, have significantly supported gold as a safe-haven asset. These countries are diversifying their reserves away from the US dollar, prompted by heightened sanctions on Russia and Iran.

Earlier this week, gold prices (XAU/USD) were on the rise after finding support at the 20-day Simple Moving Average (SMA), but they faced resistance on Wednesday. This stall occurred as the US dollar strengthened, driven by a series of hawkish remarks from Federal Reserve officials and stronger-than-expected US economic indicators. This development diminished market expectations of a Fed rate decrease in September, boosting the dollar and putting downward pressure on the gold market.

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Gold Chart Daily – The 20 SMA Is Acting As SupportChart XAUUSD, D1, 2024.05.29 21:12 UTC, MetaQuotes Ltd., MetaTrader 5, Demo

XAU has been feeling heavy again in the last two days, due to the increase in US Treasury yields, which attract investor funds as they bring higher returns when yields are high. Currently, the outlook is somewhat uncertain, although the bias remains slightly pessimistic. Following its recent record high, gold prices have declined as rising real interest rates have begun to impact the market. From a risk management perspective, buyers may find a more favorable risk-reward setup around the 2,280 support level, which was the low after the retreat from the all-time high.

Otherwise, sellers will be looking for a break below key support at the 2,150-80 zone to strengthen their bearish bias. But to trigger another sustained rally in gold prices, we may need to see a downward surprise in US inflation data such as the PCE price index tomorrow, which is the FED’s favourite inflation report. This indicates that there is a battle between buyers and sellers as the moment, with support and resistance levels between $2,300 and $2,400 providing key points for market participants to trade.

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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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