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Technical and fundamental analysis for Gold – May 2022

Published by Karl Martin Karus in category Technical & Fundamental analysis on 05.05.2022
Gold price (XAU-SEK)
18 388,09 SEK/oz
  
- 122,65 SEK
Silver price (XAG-SEK)
213,29 SEK/oz
  
- 0,94 SEK

Fundamental Analysis

Australia raised interest rates first time in a decade

Australia’s central bank has hiked interest rates in more than a decade for the first time. On Tuesday, the Reserve Bank of Australia (RBA) hiked the benchmark interest rate from 0.1 percent to 0.35 percent.

Millions of Australians will potentially face higher repayments on their home loans. For example, the average holder of 500 000 AUD (roughly 355 000 USD) Mortage could pay an extra 65 Australian dollars a month in repayments if the bank pass on the higher interest rate in full, wrote Aljazeera.

Investors wait for the FED meeting

Gold price dropped on Tuesday (3. May) to the lowest since mid-February as imminent interest rates hike by the U.S. Federal Reserve are highly likely.

The Federal Open Market Committee of the United States will convene later in the day (3. May) to discuss interest rates and is expected to raise borrowing prices by half a percentage point when it publishes its decision on Wednesday (4. May).


(Reuters – Fed rate hikes ahead)

Contracts tied to the Fed’s policy rate now show heavy bets on interest rates rising to 3%-3.25% by the end of the year, putting borrowing costs well into territory U.S. central bankers believe will put the brakes on growth, wrote Reuters.

Technical indicator analysis

Trendlines / Support & Resistance

*Red lines are downtrend. The heavy red line is the long-term trendline.
*
Green lines are uptrend. The heavy green line is a long-term trendline.
*
Blue lines are short term support & resistance lines


(Picture 1. Trendlines & Support/Resistance)
You can check more interactive graphs from our Tradingview account.


(Picture 1. zoomed in)
You can go check more interactive graphs from our Tradingview account.

  • In the last month’s Technical and Fundamental analysis for gold, we predicted: “There is a high probability for price to move sideways between 1910 USD and the 1960 USD area. We can expect the price to spike to near all-time high levels or correct itself to around 1850 USD/oz levels when breaking either level. “
  • The price reached higher than we predicted and touched the 2000 USD mark on the 18th of April.
  • As speculated in the last month’s analysis, the gold price has dropped and is currently trading near 1850 USD levels.
  • 250MA is considered to be a vital support/resistance area. In the current case, a firm support area. If the gold price breaks through the 250MA support area, we can expect the price to touch the 1760 USD area.
  • If the gold price does not break through the 250MA support area, we expect a short-term bullish movement to 1915 USD levels. From there, the situation must be evaluated to speculate on further price movements.
    If upwards, then touching if not breaking 2075 USD area.
    -If If downwards, then even 1730-1760 area is possible.

The Gartley pattern, Moving Averages, and RSI

(Picture 2. – Garterly pattern, moving averages, and RSI)

  • On a daily graph, there is a Gartley Pattern which looks like a butterfly. This version of the Gartley pattern indicates a strong bullish movement.
  • The pattern is formed near a firm support area, confirmed by another strong support –
  • There is a considerable divergence between the price graph and the RSI graph. The divergence is also a solid indication of a bullish upward movement.
  • There are three powerful upward movement signals – 250MA support, price action support (green area in picture 2), and the Gartley pattern near two strong supports.
  • Gold price potential upward movements are:
    *1915-1965 USD area
    *2050-2075 USD area
    *Breakout and new historical highs.

In conclusion, all the fundamental signs indicate a bearish gold movement because of the FED rate hikes to soften inflation pressure. On the other hand, most technical indicators show a strong potential upward trend.


Disclaimer: This article is for informational purposes only and is not intended as an investment analysis or recommendation to sell or buy commodities. Tavex is not responsible for any decisions made based on this information. Investing is associated with opportunities and risks, and the market value of commodities can both increase and decrease. Past or future yields on the commodities and financial ratios shown above do not represent a promise or an indication of future earnings

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