Congratulations, gold bugs! Last week was a roller-coaster for gold prices. Imagine—a nearly 4% plunge in price over the last two trading days, with the commodity hitting a two-week low and breaching the $2,330 level on Thursday. And there was more! Just when we thought it was the end of the line for gold, it delivered a big upset on Friday: sprinting past the $2,340 level. It is, of course, still deep in the week’s red.
Technical Talk: What’s XAU/USD Up To?
Let’s dive into the technicals. Gold prices (XAU/USD) have breached a mighty trendline that has been holding since February. This break indicates that the fight is more on the bulls’ side. The sharp back off from Monday’s all-time highs validates that gold is likely in a corrective stage, and price action favors shorts over longs.
To cut a long story short, gold may now depreciate to $2,303 on some Fibonacci fancy—or better, $2,272, the confluence of support levels since the beginning of May. Should it break below $2,325, then we could see a leg lower.
There’s always a catch, right? RSI found some oversold before finding its way to neutral, and then we’d expect to see a little pullback. Gold may also have a quick return to the trendline before falling back. Even though the medium- and long-term trends for gold still look bullish, at this time, the price action works to give us warm fuzzies that this recovery might come quick. A clean break above the trend line of $2,360 would be our confirmation for a possible recovery. Watch for a long green or even three green candles in a row.
What’s Driving These Moves? Let’s Talk Fundamentals
Gold found a temporary floor on Friday, clawing back 0.25% after its recent tumble to float around the $2,330s. This was due to market and geopolitical jitters, which pushed investors toward their favorite comfort: gold and its safe-haven appeal.
Geopolitical Jitters and Gold’s Safe-Haven Appeal
So what specifically is stirring the pot? China has been boosting its war games around Taiwan, and Ireland, Norway, and Spain have decided to recognize Palestine as an independent state. These moves cranked up geopolitical tensions and sent ripples across the markets, boosting demand for gold.
Asian stock markets didn’t take too kindly to this either. The Hang Seng dropped 1.71%, the Shanghai Composite declined 0.90%, and the Nikkei finished 1.36% lower. High interest rates added to the gloom-and-doom sentiment.
US Economic Data and Its Impact on Gold
Thursday brought a slew of surprisingly robust US economic data, so that wasn’t great news for gold. The US Purchasing Manager Index (PMI) for May, especially in the Services sector, came in higher than expected. This dampened hopes for early interest-rate cuts by the Federal Reserve, making gold less attractive since it doesn’t yield interest.
Gold Demand in India Takes a Hit
Meanwhile, over in India, the high price of gold has been a bit of a buzzkill. Reuters reported a drop in gold imports as high prices encourage people to swap old jewelry for new. So, as we wrap up this week, it’s clear that gold’s future is still up in the air. Keep your eyes peeled for more market twists and turns, and stay tuned for what’s next in this golden saga!