Gold (XAU) Daily Forecast: Prices Drop to $2,365; Hawkish Fed and Strong Dollar Impact

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Published: May 23, 2024, 06:53 GMT+00:00

Key Points:

Gold (XAU/USD) continued its decline, trading near $2,365 amid a hawkish Fed stance.
Traders are watching US Manufacturing and Services PMI, expected to remain at 50.0 and 51.3.
PBoC's gold purchases support prices, adding 225 tonnes to reserves last year.

Gold (XAU) Daily Forecast: Prices Drop to $2,365; Hawkish Fed and Strong Dollar Impact

Market Overview

Gold (XAU/USD) continued its decline, trading near $2,365 and reaching an intraday low of $2,355. This drop is largely due to the US Federal Reserve’s hawkish stance, maintaining restrictive monetary policy, and strengthening the US dollar, which pressures dollar-priced gold.

Traders are awaiting the initial May figures for the US Manufacturing and Services PMI. Expected to remain at 50.0 and 51.3, respectively, these figures indicate stagnant growth.

PBoC’s Significant Gold Purchases

The People’s Bank of China (PBoC) added 225 tonnes to its gold reserves last year, the highest since 1977, reflecting a strategy to diversify assets and reduce reliance on the US dollar. This has supported gold prices.

Federal Reserve Minutes and Rate Cut Expectations

Recent FOMC minutes highlighted concerns over persistent inflation, delaying potential rate cuts. Investors anticipate the first rate cut in September, with a nearly 60% probability of two quarter-point reductions by year-end.

The hawkish tone and potential policy tightening have contributed to downward pressure on gold prices.

Short-Term Forecast

Gold (XAU/USD) is likely to remain under pressure, trading near $2,365 due to the Fed’s hawkish stance and a strong US dollar. Immediate support is at $2,351.98, with resistance at $2,392.88. Expect bearish momentum below $2,375.

Gold Prices Forecast: Technical Analysis

Gold – Chart

During the Asian session, Gold (XAU/USD) is trading at $2,365.98, down 0.60%. The 4-hour chart shows a pivot point at $2,373.12. Immediate resistance levels are $2,392.88, $2,404.97, and $2,426.92. Key support levels are $2,351.98, $2,335.24, and $2,318.77.

Technical indicators reveal that the candles have crossed below both the 50 EMA at $2,399.47 and the 200 EMA at $2,367.33, forming a bearish engulfing pattern, suggesting a bearish trend.

The downward trendline is likely to limit Gold’s price around the $2,350 level, forming a potential double-bottom pattern. This could trigger a bullish bounce if candles close above this level. However, selling pressure is expected below $2,375.

Conclusion: Bearish below $2,375. A break above this level can boost bullish momentum.

About the Author

Arslan Aliauthor

Arslan, a webinar speaker and derivatives analyst, has an MBA in Finance and MPhil in Behavioral Finance. He guides financial analysis, trading, and cryptocurrency forecasting. Expert in trading psychology and sentiment.