Gold Price Forecast: Bullion Susceptible to Test of April Low

Gold Price Outlook

The price of gold may trade in a narrow range as it bounces back ahead of the monthly low ($1952), but and bullion may attempt to test the April low ($1950) amid the failed attempt to trade back above the 50-Day SMA ($1991).

Gold Price Forecast: Bullion Susceptible to Test of April Low

The limited response to the positive slope in the moving average raises the scope for a further decline in the price of gold as the recent weakness in the precious metal coincides with a rise in US Treasury yields, and it remains to be seen if the Federal Open Market Committee (FOMC) Minutes will influence the precious metal as the central bank plans to ‘take a data-dependent approach in determining the extent to which additional policy firming may be appropriate.’

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More of the same from the FOMC may generate a limited market reaction as the central bank appears to be at or nearing the end of its hiking-cycle, and the price of gold may stage further attempts to trade back above the 50-Day SMA ($1991) if Chairman Jerome Powell and Co. prepare US households and businesses for a looming change in regime.

However, the FOMC may tame speculation for a U-turn in monetary policy as inflation remains well above the central bank’s 2% target, and data prints coming out of the US may have a larger impact on the price of gold as the Personal Consumption Price (PCE) Price Index is anticipated to show persistent inflation.

The core PCE, the Fed’s preferred gauge for inflation, is now expected to hold steady at 4.6% per annum in April, and little evidence of softening price pressures may put force the FOMC to implement another 25bp rate hike at the next interest rate decision on June 14 as the committee is ‘prepared to do more if greater monetary policy restraint is warranted.’

Until then, the price of gold may face headwinds should the developments coming out of the US fuel speculation for a more restrictive policy, and the precious metal may no longer track the positive slope in the 50-Day SMA ($1991) amid the failed attempt to trade back above the moving average.

With that said, the price of gold may attempt to test the April low ($1950) as it initiates a series of lower highs and lows, and a further decline in bullion may continue to push the Relative Strength Index (RSI) closer towards oversold territory as it sits around its lowest level since March.

Gold Price Chart – XAU/USD Daily

Chart Prepared by David Song, Strategist; Gold Price on TradingView

• The price of gold may trade within a narrow range as it appears to be bouncing back ahead of the monthly low ($1952), but the failed attempt to trade back above the 50-Day SMA ($1991) may lead to a test of the April low ($1950) as it initiates a series of lower highs and lows.
• Failure to defend the April low ($1950) may push the price of gold towards the $1928 (23.6% Fibonacci retracement) to $1937 (38.2% Fibonacci extension) region, with the next area of interest coming in around $1886 (23.6% Fibonacci extension) to $1897 (61.8% Fibonacci retracement).
• A further decline in the price of gold may push the Relative Strength Index (RSI) closer to oversold territory as it holds around its lowest level since March, but lack of momentum to test the April low ($1950) may push bullion back towards the 50-Day SMA ($1991), with a push above the moving average opening up the $2018 (61.8% Fibonacci extension) to $2020 (78.6% Fibonacci extension) area.

Additional Resources:

USD/JPY Rally Fizzles with RSI Reversing Ahead of Overbought Zone

EUR/USD Outlook: Break of April Low Pushes RSI Toward Overbought Zone

--- Written by David Song, Strategist

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