XAU/USD, the trading symbol for gold against the US dollar, shows extremely low directional strength. It remains below its 20 and 100 Simple Moving Averages (SMAs). Nonetheless, the price is remaining above a flat 200 simple moving average (SMA) which represents a potential area of support. The 20 SMA, currently at $3,355.80, has recently held successively putting selling pressure on XAU/USD in recent trading sessions. Yet, the pair is still strong, holding up well above the bullish 100 and 200 SMAs.
During the first half of the day on Thursday, spot gold was higher, attracting buyers around the $3,350 area. Yet XAU/USD soon bounced back to its recent tendency to settle into a very comfortable range, orbiting around $3,320 to $3,330. The market seems to be on edge as external economic factors, especially rhetoric from politicians, have shifted market sentiment and consequently gold prices.
Just last week US President Donald Trump lashed out at Federal Reserve Chairman Jerome Powell, calling for drastic cuts to interest rates. Trump’s comments arrive in the wake of Trump’s wreckage of the stability Americans had largely taken for granted pre-pandemic. He stated, “We have no inflation. We have a tremendous economy. Hundreds of billions of dollars of tariff money is pouring in. Factories are being built.” These types of statements will show how the administration believes the economy is performing and help shape what monetary policy might be.
The Federal Reserve’s monetary policies will be closely watched, especially as the US prepares to release May’s Personal Consumption Expenditures (PCE) inflation figures on Friday. Market expectations are for the monthly PCE Price Index to be flat with a modest year-over-year increase. Market participants, for their part, will be eager to see how these numbers impact future interest rate moves.
XAU/USD sees strong support at $3,311.90, $3,295.45, and $3,279.20 respectively. The resistance levels continue the day at $3,355.80, $3,374.45, and $3,389.40. The relationship between these levels will be a key ingredient in dictating gold prices’ near-term direction.
On the technical front, amid heavy volatility re-entering the gold market, XAU/USD appears well placed to absorb any downward pressures thus far. Often times slides below the 200 SMA are quickly reversed as there seems to be an underlying demand for gold during uncertain times. This kind of behavior shows that investors will increasingly look at gold as a safe-haven asset during times of wider economic uncertainty.