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- Since the start of this week’s trading, the XAU/USD gold price has attempted to rebound to the upside with gains that reached the $1965 resistance level.
- There was an opportunity to buy gold yesterday when prices fell towards the $1938 support level.
- The positive momentum for the gold market came as fears of economic recession were renewed after disappointing data.
- The Fed’s upcoming policy meeting was also on investors’ minds.
- Despite recording a weekly jump last week, the precious metal remained stuck below the $2000 psychological resistance level for almost two weeks.
In general, gold prices rose by more than 1% last week, which increased their rise since the beginning of the year 2023 to date by more than 8%. In the same performance, silver prices, gold’s sister commodity, struggled to generate any momentum. As silver futures fell to 23.655 an ounce. All in all, the price of the white metal rose 0.9% last week but is still down more than 2% for the year.
On the economic side, the ISM Services Purchasing Managers’ Index fell to 50.3 in May, down from 51.9 in April. This was below the market estimate of 52.2. The services PMI showed swings in sub-indices across the board: business activity, employment, new orders, and prices. In addition, US factory orders rose 0.4% in April, down from a downwardly revised 0.6% in March, according to the Census Bureau. This also came in below the market estimate of 0.8%. Core US factory orders fell 0.2% for the third consecutive month. Meanwhile, the S&P Global Composite and Services PMI readings rose to 54.3 and 54.9, respectively.
With the US labor market adding 339,000 new jobs last month, there is talk from many economists that the country could see full employment stagnation amid rampant price inflation.
The gold market is also finding support from the sideways trend of the dollar. The US Dollar Index (DXY), a measure of the US currency against a basket of other major currencies, was unchanged at 104.01. The DXY dollar index posted a tepid weekly gain of 0.2% and is up 0.5% since the start of the year. Generally, a stronger profit is bad for dollar-denominated commodities because it makes them more expensive for foreign investors to buy. Meanwhile, the price of gold rose on weaker US Treasury yields, with the benchmark 10-year yield settling at 3.7%. The yellow metal is sensitive to interest rate fluctuations because it can affect the opportunity cost of holding non-yielding bullion.
In other metals markets, copper futures rose to $3.7615 a pound. Platinum futures rose to $1,035.40 an ounce. Palladium futures jumped to $1410.00 an ounce.
According to the performance on the daily chart below, the gold price, XAU/USD, is in a stage of reversing the recent bearish outlook. The strong bulls may regain control of the direction of gold, in the event that prices move towards the 1985 resistance levels and the psychological top of $2000 an ounce again. On the other hand, and for the same period of time, the bears’ control over the direction of gold will strengthen in the event that prices move towards the support levels of 1935 and 1918 dollars, respectively.
The fate of the gold price will continue to depend on the performance of the US dollar, the future of tightening the policy of global central banks, fears of global economic recession, and the interaction of investors with any new developments regarding global geopolitical tensions.
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