Gold (XAU/USD) price has faced a sharp rejection after refreshing its all-time high in May 2023. The precious metal had a sharp sell-off and closed the month with a 1.35% loss. The price has bounced off a key trendline, but the bulls need more momentum to signal a bullish reversal.
Gold price per ounce is experiencing its first green weekly candle after three consecutive red weeks. After a major bounce on Wednesday, XAU/USD dropped 0.48% on Thursday. Silver price also showed a negative price action and was down 0.84% till press time.
Safe haven assets like gold and silver usually show an inverse correlation with the dollar strength index. Recently, the DXY Index has rebounded after tagging its yearly lows. The resulting bounce has sent the index to its highest level since March 17. This has proved to be a major headwind for Silver and Gold.
If the dollar strength index keeps rising, then the Gold price may retest its May 2023 lows once again. The CPI data for May 2023 and the upcoming FOMC meeting in June will keep the prices in check in the near term. A significant increase in inflation may act as a catalyst for a rally in DXY.
The XAU/USD chart reveals that the pair has bounced from the upward trendline. This bounce comes as no surprise, as the RSI on the 4H timeframe depicted a bullish divergence. The price is still not out of hot water as the DXY index is still gaining strength.
As long as the price remains above $1960, my Gold price forecast will remain bullish. A break below this level may trigger a deeper pullback to $1847, which is the 0.5 Fib retracement level. A close attention must also be given to the actions of the US Federal Reserve as a major policy shift may affect commodity prices quite abruptly.
I’ll keep posting my updated outlook on Gold and other assets in my free Telegram group, which you’re welcome to join.
This post was last modified on Jun 01, 2023, 09:52 BST 09:52