Last week, the value of gold continued to move horizontally near the 50-day moving average below the horizontal resistance level. In fact, after the exceptional performance of the first quarter of 2024, the value of the precious metal continued its period of consolidation despite the improvement in the US economic situation could provide greater demand for gold.
- Last week the value of gold remained perfectly static opening and closing the session at exactly the same level at €69.80 per gram.
- From a Forex technical analysis point of view, the rapid upward rally of gold towards the absolute maximum was abruptly interrupted by the horizontal resistance at €72.15 per gram, near which the precious metal made a trend reversal and started to move towards its support level at €68.25 per gram. Subsequently, the upward trend of gold regained strength until it returned above the 50-day moving average and tested the diagonal resistance level near which the trend reversed again.
- From a fundamental point of view, the value of gold will be strongly influenced by the Eurozone inflation data that will be announced during the morning of Tuesday, the press conference of Jerome Powell that will take place on Tuesday afternoon and the publication of the Fed Minutes that will take place on Wednesday evening. All these macroeconomic events will be crucial in determining the next steps of the monetary policy of the two most important central banks in the world. Stay up to date with the events of the financial markets at DailyForex.
Goldilocks Scenario and the Value of Gold Struggles to Grow
From a macroeconomic perspective, the US released exceptional macroeconomic data last Friday, showing inflation and core inflation decreasing from 2.7% and 2.8% respectively to 2.6%. This change broke the stalemate that characterized the first six months of 2024 and provided the signal that the market was expecting to return to pricing in two cuts during 2024. On the other hand, however, the value of gold did not react to the upside as expected and ended Friday’s session lower.
One of the main reasons is that the American economy seems to have entered a “Goldilocks Scenario”, a “Goldilocks” scenario, so called because it is characterized by moderate economic growth, low inflation and a strong labor market, creating a very accommodating economic situation even for restrictive monetary policies and perfect for achieving a soft landing, the final goal of the Federal Reserve. Therefore, observing this macroeconomic situation, many investors are deciding to invest in the stock market, expecting rapid growth if this scenario were to materialize.
Furthermore, the geopolitical uncertainty induced by the European elections would also seem to have partly diminished after Marine Le Pen’s party reached “only” 33.5% of the votes during the first session of the French national elections, significantly reducing the possibility of an absolute majority. If you are looking for safety and reliability for your trading, check out the list of the best XAU/USD brokers to trade today in the Forex markets.
Gold Continues Rally but Signals Sharp Slowdown!
According to today’s gold forecast, the value of gold continues to show its statuary stability and the continuation of the consolidation period that has now begun during the beginning of the second quarter of 2024.
On the other hand, analyzing the structure more carefully, it is possible to notice a very large wedge structure formed by a diagonal resistance and a horizontal support at €68.24. This structure over the last three months has been the main responsible for the consolidation period thanks to the progressive reduction in volatility that the key levels have induced on the value of gold.
In the long term, the price will break out of the structure and many analysts agree that it will be on the upside with the subsequent resumption of the original rally, which appears to be still intact despite the very long period of consolidation.
However, in the short term the price seems to react very significantly to the 50-day moving average and last Friday’s closing candle signals a possible continuation to the downside, at least in the short term.
Weekly Gold Outlook
- Current resistance level: €71.10 per gram, identified by the historical key diagonal level that has characterized the upward trend of gold over the last 4 years.
- Current support level: €68.24 per gram, identified by the confluence of support formed by the key horizontal level and the 50-day moving average.
- Upside target: €72.15 per gram, the resistance zone at which the value of gold reversed its trend after reaching its all-time high.
- Downside target: €68.24 per gram.
Considering the current technical structure of the pair, in the short term the most likely scenario is a continuation of the correction towards the support level at €68.24 per gram, continuing the consolidation period started in the last 3 months.
However, the value of gold will be highly volatile due to this week’s news on the Federal Reserve’s monetary policy, Jerome Powell’s press conference and the Eurozone inflation data, which could push gold higher if they surprise the market positively. Trade today with the best CONSOB authorized brokers to keep your funds safe.
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