- Gold price loses ground in Monday’s Asian session.
- The lower bets on the Fed rate cuts weigh on the precious metal.
- Fed’s Jefferson and Mester are set to speak later on Monday.
Gold price (XAU/USD) loses its recovery momentum on Monday during the Asian session. The hawkish remarks from the Federal Reserve (Fed) and growing speculation that the Fed might delay its easing plans have boosted the Greenback and dragged the USD-denominated gold lower. However, signs of economic weakness and ongoing geopolitical tensions in the Middle East are likely to support precious metals in the near term.
Gold traders will keep an eye on the Fed’s Jefferson and Mester speeches on Monday. Later this week, the US Consumer Price Index (CPI), Producer Price Index (PPI), and Retail Sales will be in the spotlight. In case of stronger-than-expected economic data, this might dampen the hope for a Fed rate cut and exert some selling pressure on the XAU/USD
Daily Digest Market Movers: Gold price attracts some sellers amid the Fed’s hawkish remarks
- San Francisco Fed President Mary Daly highlighted the need for prolonged restrictive policy to achieve the Fed’s inflation targets.
- Atlanta Fed President Raphael Bostic said that the central bank is probably still planning to cut its interest rates this year, despite the uncertain outlook.
- Dallas Fed President Lorie Logan said that there are upside risks to inflation, adding that it is too soon to cut interest rates.
- Minneapolis Fed President Neel Kashkari stated that he’s in a “wait-and-see mode,” and there is a “high” bar to concluding that higher rates are needed to cool inflation.
- The Israeli military said that it launched operations in northern Gaza overnight and that “precise operations” are ongoing in eastern Rafah and near the Rafah border, as well as in the Zeitoun neighborhood in central Gaza. The military engagement in Rafah occurs before a full-scale invasion, per CNN.
- The initial reading of the Michigan Consumer Sentiment Index dropped to 67.4 in May from 77.2 in April, weaker than the expectation of 76.0.
- The University of Michigan’s (UoM) one-year inflation outlook jumped to 3.5%, while the five-year outlook rose to 3.1%. Both figures registered the highest level since November 2023.
Technical Analysis: Gold price keeps the constructive picture unchanged
The gold price edges lower on the day. Nonetheless, the bullish stance of the yellow metal remains intact as it holds above the key 100-day Exponential Moving Average (EMA) on the four-hour chart. The upward momentum is supported by the 14-day Relative Strength Index (RSI) which stands in bullish territory around 63.50, suggesting further upside looks favorable.
The first upside barrier for XAU/USD will emerge near a high of May 10, $2,378, en route to the $2,400 psychological level. A decisive break above this level could clear the path for a rally to the next major resistance near an all-time high near $2,432, and then the $2,500 figure.
On the downside, the key support level is seen near the confluence of the resistance-turned-support level and the 100-period EMA at $2,325. Further south, the next contention level is located near a low of May 2 at $2,281.
Insight into Gold Investments
Investors often turn to gold as a safe-haven asset during times of economic uncertainty or geopolitical tension, which can drive up the price of the precious metal. Additionally, central banks purchasing gold to diversify their reserves can also impact the gold market, as seen with the significant increase in gold reserves in 2022.
Understanding Gold Price Movements
Gold prices can be influenced by a variety of factors, including geopolitical instability, fears of a recession, and the value of the US dollar. Investors and central banks closely monitor these factors as they impact the price of gold, with an inverse correlation often observed between gold and the US dollar.
