Article by: ETO Markets
Gold prices are maintaining recent gains, trading around $3,365.83 after a strong rebound earlier in the week largely erased the previous week's losses. The market focus is now squarely on the upcoming Federal Reserve policy decision later this week. While recent robust US economic data, including a better-than-expected Services PMI reading (51.6 for April), could encourage a more cautious stance from the Fed regarding rate cuts, several factors continue to underpin the precious metal. Persistent geopolitical tensions, encompassing the Russia-Ukraine conflict, instability in the Middle East highlighted by recent Israeli airstrikes in Yemen, and overarching uncertainty surrounding US trade policies despite tentative talk of easing tensions with China, are fuelling safe-haven demand. This is further supported by the ongoing trend of significant central bank gold purchases and strong inflows into gold-backed ETFs during the first quarter and into April. Market sentiment appears cautiously optimistic, with underlying bullish factors providing support, though traders seem hesitant to place aggressive bets ahead of potential signals on the Fed's rate path from Chair Powell's upcoming statements.
From a technical perspective, Gold (XAU/USD) is consolidating near recent highs after reclaiming the $… level. Immediate resistance is being tested around the May 6th high of $…, which aligns closely with the 61.8% Fibonacci retracement level previously cited near $…. A sustained break above this zone could open the path towards psychological resistance at $…, followed by the $… area. On the downside, the recently surpassed $… mark now serves as initial support. Below this, the daily low recorded on May 6th near $… provides the next significant level. Further down, crucial support lies around the convergence of the 9-day Exponential Moving Average ($…) and the 10-day Simple Moving Average ($…), followed closely by the 20-day Simple Moving Average at $…, which could be tested if bearish pressure mounts.
