Key Points
- Liquidity providers are back in the office following the Memorial Day weekend.
- Gold has posted a significant $125 seven-day range.
- Daily resistance levels are present at $2373.95 and $2404.19.
Market Overview
Over the past seven sessions, gold (XAU/USD) has been on a wild rollercoaster ride. Following a hard test of the $2,450 area, prices have sold off dramatically. Now, traders seem happy to price bullion in the vicinity of $2,350.
The key market drivers remain geopolitical uncertainty and Fed monetary policy. As of this writing, the CME FedWatch Index is pricing more than a 60% chance of a September rate cut. This is one reason gold continues to hold its ground amid concerns of entrenched inflation.
Liquidity Returns To The Office
One of the big challenges facing traders over the past 48 hours has been the Memorial Day holiday. American liquidity providers were out of the office Monday; US equities markets were closed, and CME commodity futures featured an early halt to trading. Given this dynamic, many traders struggled to find opportunities in the thin and choppy markets.
For gold, Monday was a bullish session. Prices rose nearly 0.75% as metals players went long to open the week. Thus far, Tuesday has been another bullish day, with bullion rising another 0.50%.
Technical Outlook
The XAU/USD has posted a healthy $125 seven-day range on the daily chart. This has brought a nice Fibonacci retracement sequence into play, highlighted by several key resistance zones.
The first resistance area worth noting is the Daily 38% Retracement at 2373.95. If this area is tested, it’s likely that at least some short-term sellers will defend the 2375 zone. However, if this level gives way, then the 62% Fibonacci Retracement at 2404.19 is likely to challenge bidders.
From a macro perspective, it’s difficult not to maintain a bullish bias toward gold. Fed rate cuts appear to be in the cards for later this year, and there is no sign of global geopolitical tensions subsiding. Also, US election uncertainty is sure to drive some risk hedging from investors. While it may take some time to develop, it will be a major surprise if the XAU/USD doesn’t test the 2,500 threshold this summer.
Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.
