Gold struggles to find direction as uncertainty reigns
Updated
Gold traders have been struggling to find a direction in recent weeks as some of the key drivers have diminished. XAU/USD has been hovering around $2,310 for the past eight days as there is a lack of drive to be either a seller or buyer under the current conditions.
The de-escalation of tensions between Iran and Israel has removed some of the bullish appetite in gold traders, as has the lack of clarity on when the Federal Reserve will be able to start cutting rates. This caused the initial pullback from the highs above $2,400 back in mid-April and has continued to weigh on gold prices. But, the momentum hasn’t become bearish as there is also a lack of appetite to be a seller in XAU/USD, which has kept the pair supported. Despite the relative calmness in the Middle Eastern front over the past few weeks, the conflict is far from over as there has been a lack of progress towards a ceasefire, meaning investors are still looking to keep part of their portfolio diversified, and gold is always a good option. Moreover, even if it takes longer than originally hoped, the Federal Reserve is expected to start cutting rates at some point, which should propel gold higher.
So gold is likely to remain trading with a lack of direction until something gives. Next week’s
US CPI and PPI data could provide some momentum to XAU/USD traders as it gives further insight into how inflationary pressures have evolved in the US and how they may affect the Fed’s ability to cut rates this year. A big catalyst for gold buyers would be confirmation of rate cuts from Fed officials, but that may take a while. In the meantime, strong economic data could continue to weigh on gold unless we see further escalation of tensions in the Middle East.
XAU/USD technical analysis
The short-term bias in XAU/USD has become sticky as the lack of direction has allowed indecision to creep in. The RSI has managed to remain above 50 since the start of May which could suggest resilience from bulls but the 23.6% Fibonacci retracement from the February lows to the April highs has been limiting the gains above $2,330. This level likely continues to offer resistance as the 20-day SMA converges towards it. A break above $2,350 would be needed to consider a return to the bullish bias in the short term. Meanwhile, XAU/USD has remained supported above $2,280 and is likely to continue doing so in the absence of any significant bearish catalyst.
The de-escalation of tensions between Iran and Israel has removed some of the bullish appetite in gold traders, as has the lack of clarity on when the Federal Reserve will be able to start cutting rates. This caused the initial pullback from the highs above $2,400 back in mid-April and has continued to weigh on gold prices. But, the momentum hasn’t become bearish as there is also a lack of appetite to be a seller in XAU/USD, which has kept the pair supported. Despite the relative calmness in the Middle Eastern front over the past few weeks, the conflict is far from over as there has been a lack of progress towards a ceasefire, meaning investors are still looking to keep part of their portfolio diversified, and gold is always a good option. Moreover, even if it takes longer than originally hoped, the Federal Reserve is expected to start cutting rates at some point, which should propel gold higher.
So gold is likely to remain trading with a lack of direction until something gives. Next week’s
US CPI and PPI data could provide some momentum to XAU/USD traders as it gives further insight into how inflationary pressures have evolved in the US and how they may affect the Fed’s ability to cut rates this year. A big catalyst for gold buyers would be confirmation of rate cuts from Fed officials, but that may take a while. In the meantime, strong economic data could continue to weigh on gold unless we see further escalation of tensions in the Middle East.
XAU/USD technical analysis
The short-term bias in XAU/USD has become sticky as the lack of direction has allowed indecision to creep in. The RSI has managed to remain above 50 since the start of May which could suggest resilience from bulls but the 23.6% Fibonacci retracement from the February lows to the April highs has been limiting the gains above $2,330. This level likely continues to offer resistance as the 20-day SMA converges towards it. A break above $2,350 would be needed to consider a return to the bullish bias in the short term. Meanwhile, XAU/USD has remained supported above $2,280 and is likely to continue doing so in the absence of any significant bearish catalyst.
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