Gold Weekly Outlook, Gold Price Forecast: In a flurry of scheduled and unscheduled news events that unfolded late on Friday, the outlook for gold seems to be heading towards positive territory as we approach the new week. Notably, US Treasury Secretary Janet Yellen’s communication with CEOs of major banks, suggesting the possibility of more mergers, coincided with Federal Reserve Chair Jerome Powell’s attempt to maintain neutrality ahead of the upcoming FOMC rate meeting. Complicating matters further, discussions concerning an agreement to raise the US debt ceiling came to a halt as GOP members decided to withdraw from the negotiating table.
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As time passes without reaching a consensus, market participants may find themselves compelled to consider alternative safe-haven options with increasing urgency, which bodes well for the prospects of the yellow metal. Additionally, Yellen’s interaction with CEOs of the largest banks in America, highlighting the potential need for further mergers, has sparked renewed speculation and unease within the regional banking sector just as it seemed to be recovering. In early May, when JP Morgan absorbed First Republic Bank, and news of two more stressed banks possibly following suit emerged, gold prices experienced an approximately $100 surge. If additional mergers are on the horizon, it wouldn’t be far-fetched to anticipate another increase in gold prices.
During a Fed-hosted event on Friday, Jerome Powell made an appearance and acknowledged that interest rates might not need to rise as high due to tightening in the credit market. Consequently, traders scaled back their bets on the likelihood of a 25-basis point hike in June. The simultaneous decline in the dollar and yields further supports the valuation of gold. Prior to Powell’s remarks, markets had priced in a roughly 32% chance of a June hike, which decreased to 20% afterward.
The inverse relationship between gold prices and the US dollar, as depicted by the US dollar basket acting as a proxy for the greenback, becomes evident. If the decline observed in the dollar on Friday continues into the next week, it has the potential to further boost gold prices.
KEY TECHNICAL LEVELS TO WATCH FOR GOLD
A glance at the weekly chart for gold reveals a recent decline from the all-time high at 2081.80, with the price action still within the broader ascending channel. On Friday, there was a late surge that briefly touched the 1956 level before recovering. Considering the overall bullish trend, a potential near-term reversal might set the stage for a continuation of the upward movement.
Examining the daily chart of gold helps identify several key levels that may come into play in the upcoming week. If Friday’s late surge results in a close above 1970, it would establish this level as immediate support, followed by the previous swing high at 1960 and the long-term level of 1956. On the upside, both 2000 and 2008 hold significance as they have previously acted as support or resistance in 2023. Beyond those levels, the only obstacle preventing a return to the all-time high are the swing highs around 2048.
