- The price of gold traded higher on Monday as the US dollar continued to slide despite subdued trading conditions due to the US holiday,
- XAUUSD last traded near $1,860 and looked for recent highs after finding good support at its 21 and 200 DMAs.
- If market participants continue to cut Fed tightening bets, gold could reclaim $1,900, even if risk appetite recovers as well.
The price of gold (XAU/USD) It trades on a bullish bias in a quiet and lightly traded market ahead of the US Memorial Day holiday, aiming to test last week’s highs around $1,870/troy ounce. At current levels around $1,860, XAUUSD is up around 0.4%, having found support earlier in the session at the 21-day moving average ($1,849.25) and amid technical buying continued after spot prices found solid support at the 200 DMA (at $1,840) last week.
Gold’s gains on Monday come despite the positive tone in the global macro economy and are fueled by the continued weakening of the US dollar to fresh monthly lows. On the back of US consumer price inflation data released earlier in the month and core PCE inflation data released last week, market participants are less concerned about US inflation .and consequently the Fed’s tightening bets have seen a modest retracement (ie for the second half of 2022 and 2023).
US bond markets are closed on Monday, but price developments in the gold and dollar markets suggest that yields are likely to open the week lower, a continuation of the weakening trend which, along with the recent weakening dollar, has lifted XAUUSD more than 4% from mid-month lows below $1,790. US data will be in the spotlight this week with several top-tier releases such as the May Manufacturing PMI Survey and the official May Labor Market Report due later in the week.
Analysts maintain that if the trends of diminishing fears of inflation in the US, lowering of the Federal Reserve’s tightening bets and, consequently, an increase in the fall in US yields, continue. For the US and dollar, this could be a medium-term bullish driver for gold, even if risk appetite (ie US equities) also increases. Given that XAUUSD has found strong support at its 21 and 200 DMAs, the prospects for a further rally towards the 50 DMA near $1,900 look good.
Technical levels
Source: Fx Street
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