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Gold Technical Analysis: Prices Under Downward Pressure

  • The continued gains of the US dollar, with momentum from expectations of raising US interest rates, is a negative factor for the XAU/USD gold price.
  • This was subjected to selling operations that pushed it towards the $1960 support level, at the time of writing the analysis.
  • The gold market has been subject to profit-taking sales two weeks ago, after testing the resistance at $2062 an ounce.
  • This performance is on an important date this week, with a round of important and influential economic data.

Yesterday, US stocks drifted to a mixed finish, as Wall Street awaited the outcome of a pivotal meeting aimed at averting a potentially catastrophic default on US government debt. Accordingly, the S&P 500 index was in a virtual stalemate after flipping between small gains and losses during the day. It rose 0.65, or less than 0.1%, to 4,192.63. The Dow Jones Industrial Average fell 140.05 points, or 0.4 percent, to 33,286.58 points, and the Nasdaq Composite Index rose 62.88 points, or 0.5 percent, to 12,720.78 points.

The US stock market is approaching its highest level since August but has been mostly within a narrow range for weeks as many of the big concerns weigh. The biggest risk in the near term is the possibility of a US default, something that could happen as early as June 1. This is when Washington may run out of cash to pay its bills, unless Congress allows it to borrow more. Since Treasurys are seen as the safest investment on earth, economists and investors say a default would likely lead to a recession for the economy and deep pain for financial markets.

US President Joe Biden and House Speaker Kevin McCarthy were scheduled to meet after US stock markets closed to discuss the debt limit. Talks so far have been hit and miss, with stocks rallying in the middle of last week hoping the deal will move forward, but they foundered on Friday when negotiations hit an impasse.

Another outstanding concern in the market is the strength of the US banking system, which is beginning to collapse under the weight of much higher interest rates. As three high-profile US failures have shaken confidence since March, investors have been looking for the next potential weak link. So much scrutiny has come on PacWest Bancorp, its stock jumping 19.5% after it agreed to sell a portfolio of construction mortgages for about $2.6 billion of the amount still owed to Kennedy Wilson. Backwest is one of the small and medium-sized regional banks that Wall Street has highlighted in its search for the next potential bank with low confidence. Before that, other banks had collapsed after depositors withdrew their money in one go to create debilitating outflows. PacWest stock is still down 70.2% for the year-to-date.

Elsewhere on Wall Street, shares of Micron Technology fell 2.8% as tensions between China and the United States escalated. On Sunday, the Chinese government said Micron’s products had unspecified “serious network security risks” that could affect national security. Sensitive computer users are advised to stop purchasing Micron products.

Shares of Meta Platforms rose 1.1% after it dumped news that European regulators had hit it with a record $1.3 billion privacy fine. Meta described the decision as flawed and unjustified. 

According to the performance on the daily chart below, the XAU/USD gold price is still in a bearish correction range. The bulls will not regain control of the trend without returning to the vicinity of the psychological resistance level of $2000 an ounce again. At the same time, if the current gold selling operations continue, the bears may move prices towards the strongest support levels at 1945 and 1930 dollars an ounce, respectively. The XAU/USD gold price may remain moving in a narrow range with a bearish tendency until the markets and investors react to the results of the important US economic data and what will be issued by the US Federal Reserve.

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