Market Analysis

Gold price dips amidst Fed’s hawkish remarks

Amos Simanungkalit · 29 May 202494K Views

Gold prices (XAU/USD) halted a three-day rally on Wednesday amid a modest rebound in the US Dollar (USD). Hawkish comments from several Federal Reserve officials and stronger-than-expected US economic data reduced expectations of a Fed rate cut in September, bolstering the USD and weighing on USD-denominated gold. However, geopolitical tensions and uncertainty continued to support gold as a safe-haven asset. Central bank demand remained strong, providing underlying support for higher gold prices in the near term.

Market focus remained on the Fed’s Beige Book and a speech by Fed's John Williams on Wednesday. The release of the US Core Personal Consumption Expenditures Price Index (Core PCE) on Friday, expected to show a 0.3% MoM increase and a 2.8% YoY rise in April, could signal persistent inflationary pressures. Any indications of sustained inflation might delay a Fed rate cut, potentially dampening gold prices due to higher opportunity costs associated with rising interest rates.

From a technical standpoint, although gold prices showed slight declines, the longer-term bullish outlook remained intact as the metal held above the key 100-day Exponential Moving Average (EMA) on the 1-hour chart. The 14-day Relative Strength Index (RSI) near the 50-midline suggested potential for further consolidation or lack of clear direction in the near future.

In terms of price levels, immediate resistance was identified at the upper Bollinger Band around $2,427, with further upside potentially targeting the all-time high of $2,450 and the psychological barrier at $2,500 upon a breakout. On the downside, initial support was at the recent low of May 24 at $2,325, followed by the $2,300 level and the lower Bollinger Band support near $2,277. Further declines could test the 100-day EMA support at $2,222.

Overall, while short-term fluctuations were influenced by USD strength and economic data, the broader bullish sentiment for gold remained supported by geopolitical uncertainties and central bank activity.