Gold (XAU/USD) has gained follow-through buying for the second consecutive day, rising to a two-week high around the $2,373 area during early European trading on Thursday. This upward momentum is supported by market expectations of interest rate cuts from major central banks to boost economic activity.
KEY FACTORS INFLUENCING GOLD PRICE
- Central Bank Rate Cuts:
- The Bank of Canada (BoC) reduced its benchmark rate for the first time in four years, reflecting concerns about slowing economic growth.
- The European Central Bank (ECB) is anticipated to cut interest rates at its June policy meeting, the first reduction since March 2016.
- Speculation is growing that the Federal Reserve (Fed) will also lower rates soon, amid signs of a slowdown in the US economy.
- US Dollar and Treasury Yields:
- US Treasury bond yields remain near their lowest levels in over two months, contributing to a weaker US Dollar (USD) despite its modest recovery in recent days.
- The subdued USD and low yields enhance the appeal of non-yielding assets like gold.
- Geopolitical Tensions:
- Ongoing conflicts in the Middle East continue to support the demand for safe-haven assets, including gold.
- Upcoming US Data:
- Traders are awaiting the release of the US Nonfarm Payrolls (NFP) report on Friday, which could provide further direction for gold prices.
TECHNICAL ANALYSIS
From a technical perspective, gold prices show a near-term bullish bias, but mixed oscillators on the daily chart suggest caution for further gains. Here are the key technical levels to watch:
- Upside Resistance:
- Momentum beyond the $2,364 area (last week’s swing high) could trigger further bullish sentiment.
- Significant resistance is expected near the $2,400 mark.
- Further upside could see gold testing the $2,425 zone and potentially reaching the $2,450 region, near the all-time peak touched in May.
- Downside Support:
- Any meaningful pullback below $2,360 might attract buying interest around the $2,340 horizontal zone.
- Key support lies around the $2,315-2,314 area, a multi-week low touched earlier this week.
- A decisive break below this level could confirm a breakdown through the 50-day Simple Moving Average (SMA), paving the way for deeper losses.
- Further declines could see gold testing the $2,300 mark and potentially the $2,280 support zone.
CONCLUSION
Gold’s recent rally reflects a combination of central bank policy expectations, geopolitical tensions, and technical factors. While the near-term outlook remains bullish, traders should be cautious of potential resistance near the $2,400 level. Conversely, key support levels around $2,315-$2,314 and $2,300 will be crucial in maintaining the current uptrend. The upcoming US NFP report will likely be a significant catalyst for future price movements.
