On Tuesday, the price of gold increased in response to the decrease in US Treasury yields. This decrease occurred following an agreement in Washington to increase the government’s debt limit, which prevented a potential default. However, it remains unclear if this decline in gold prices will continue in the short term.
The yields of near-end US Treasury bills experienced a significant decrease even though the approval of the deal is contingent upon receiving consent from Congress prior to June 5th, which represents the deadline for the Treasury Department’s ability to fulfill its financial obligations. The House is anticipated to vote on the matter on Wednesday, allowing the Senate sufficient time to evaluate it before June 5th.
XAU/USD 240-minute Chart
Gold’s potential for growth may be limited by the increasing likelihood of a rate hike by the US Federal Reserve during its upcoming meeting. The CME FedWatch tool reports that markets now anticipate a 60% probability of a 25 bps Fed rate hike at the June meeting, compared to just 25% one week ago.
XAU/USD Daily Chart
XAU/USD: Short-term trend remains down
The 240-minute technical charts for XAU/USD demonstrate a clear downtrend channel since early May, which is further confirmed by colour-coded candlestick charts using trending and momentum indicators. In order for the current downward pressure to dissipate, the yellow metal must surpass the 1985-2000 range, which includes both the 200-period moving average and the late-March high on the 240-minute charts.
XAU/USD Daily Chart
The daily charts indicate that the trend has shifted to a consolidation phase within the larger bullish structure, as evidenced by the colour-coded candlestick charts. Historical trends suggest that these consolidations can last anywhere from several days to several weeks. Currently, gold is maintaining its position above a strong support level around 1930, which includes the 89-day moving average, an uptrend line from late 2022, and the lower boundary of the Ichimoku cloud on the daily charts. It is imperative that this support remains intact, as any decline below it could potentially trigger a drop towards the 200-day moving average at approximately 1835.
XAU/EUR Monthly Chart
XAU/EUR: Slowing momentum on higher timeframe charts
The momentum of XAU/USD has decelerated on higher timeframe charts, while XAU/EUR has experienced recent increases. Nevertheless, gold has not managed to surpass the March highs of 1865-1885 against the euro. Should an uptrend line from early 2021 (around 1725) be breached, it would signify a dissipation of upward pressure in XAU/EUR.
The aforementioned charts utilize a color-coding system wherein blue candles denote a Bullish phase, red candles indicate a Bearish phase, and grey candles signify Consolidation phases within either type of trend. It should be noted that grey candles may also emerge towards the culmination of a trend. However, it is important to note that the color of the candle does not serve as a predictive indicator; rather, it simply indicates the current trend. In fact, the candle color may change in subsequent bars. It is possible for false patterns to arise in areas surrounding the 200-period moving average or support/resistance levels, or in markets that are trending sideways or experiencing choppiness. The author cannot guarantee the accuracy of this information and past performance does not necessarily predict future performance. Users must assume personal responsibility for utilizing this information at their own risk.