- Summary:
- Gold price hit a new all-time high on Monday, following a pattern that has become all too common in 2024. What's driving the commodity?
Gold price rose to new all-time highs on Monday, hitting $2450 per ounce in the spot market. Gold price was up by 1.10 percent in the intraday trading session at the time of writing, bringing its gains in May to almost 7 percent. The yellow metal’s current rally is attributed to increased perception that the Federal Reserve is likely to lower interest rates in the coming half of the year.
The XAU/USD pair is likely to stay in the ascending lane in the near term as multiple weak economic data by the US economy weighed down on the dollar. The DXY Index, which measures the dollar’s strength against six major currencies, has been hovering around 104.400 territory for the last three trading sessions, underlining the greenback’s weakening appeal.
Fed Chairman last week stated that the central bank will need more data to prove that inflation is on its way down to the targeted rated of 2%. This is likely to provide some support for the dollar, but increased demand for the dollar by various central banks will likely give gold an edge. Many central banks, led by China’s have been piling up gold in a strategy aimed at diversifying their forex reserves and minimising exposure to the downside of a strong dollar.
Elsewhere, yields on US treasury bonds have also weakened in recent days, providing more propulsion to gold prices. As of this writing, yields on the benchmark 10-year bonds are at 4.42 percent, bringing little competition to non-yielding gold. Two FOMC members are scheduled to speak on Monday, and the market could pick some cues from them on the XAU/USD trajectory.
Technical analysis
The momentum on gold price signals control by the buyers, and favours the continuation of the upside. The pivot is at 2435.45 and the upside will likely continue if the price action stays above that level. That momentum will likely meet the first resistance at 2450.32, but a break beyond that point is could build propulsion to push the price to test 2460.61 On the other hand, the sellers are likely to take control if the price moves below 2435.45. The resulting momentum will likely establish the first support at 2425.63, and a break below that level will render the upside narrative invalid. Furthermore, the action could push the price further down to test 2417.40.
