XAU – Gold on the Verge of a Breakout, Poised for Significant Volatility

Gold maintained a volatile trading pattern last week, softening from a high of $4580 at the beginning of the week, hitting a low of $4367 on Thursday, before rallying again on Friday to test $4595, before closing at $4540.2. This initial decline followed by a surge was heavily influenced by macroeconomic news: at the beginning of the week, news of a possible resumption of trade negotiations between the U.S. and China briefly boosted risk appetite, giving the dollar a breather and putting downward pressure on gold; towards the end of the week, renewed uncertainty surrounding the negotiations reignited safe-haven demand, driving a rapid rebound in gold prices.

Technically, gold prices are currently at the end of a sensitive triangle pattern. The monthly chart issued a sell signal in March, with the three moving averages diverging downwards, consolidating between $4489 and $4777. Weekly resistance levels are at $4576, $4654, and $4718, with a potential test of the 50-week moving average support at $4208.

Gold prices quickly found support after a sharp drop at the end of March, with $4472 considered a key support level. A small descending parallel channel has recently formed, with a top at $4675 and a bottom at $4348. From the mid-May low of $4453 to $4580, and then a pullback to $4366, the 1.618 extension target is $4573. Although it reached a high of $4595 last week, the closing price retreated and failed to hold above this level, currently trading within the $4493-$4573 range. If it can stabilize and break above $4573, it could further challenge the 2.618 extension target of $4699, while $4651, previously a support level, has now become resistance.

On the upside, watch the 25-day moving average at $4591 and the 50-day moving average at $4607/$4628, both of which are at the downtrend line resistance level. The next level of resistance is the 100-day moving average at $4803. The supporting levels are at $4504, $4477, and even $4461, with the latter being the bottom support of a recent sensitive triangle pattern. The 200-day moving average is at $4401, and the 250-day moving average is at $4191. These two moving averages have remained unbroken for nearly two years. If the upward trendline support at $4380 is breached, the correction will be significantly deeper.

The early-month dividing line is expected to be at $4558. A sustained move upward could indicate a stronger trend, but a change may occur mid-month. The resistance levels are seen at $4649, $4744, and even $4798, with supporting levels at $4444 and $4289 respectively. The estimated trading range for this week is $4468 to $4583, with a significant breakout from the triangle pattern expected within two weeks.

Another force suppressing gold prices is the hawkish comments from Federal Reserve officials and the resilience of U.S. economic data. Several officials reiterated the need to maintain high interest rates, even not ruling out restarting rate hikes, providing support for the dollar and limiting the upside potential for gold and silver. Better-than-expected U.S. consumer confidence and some employment data reinforced expectations that high interest rates will persist for longer, explaining why gold prices retreated after an initial surge and failed to break through key resistance levels.

Looking ahead to this week, a series of major events are scheduled for early June, potentially leading to significant volatility in the gold and silver markets, which are already on the verge of a breakout. The most crucial event is Friday's US May non-farm payroll report: strong data will pressure gold and silver to test the $4472 support level; unexpectedly weak data could fuel safe-haven demand and bets on interest rate cuts, potentially pushing gold prices above the $4591 resistance zone and then challenging $4699.

The ISM manufacturing and services PMIs on Monday and Wednesday will provide initial insights into economic activity. Coupled with tariff negotiations and sudden geopolitical shifts, investors must be wary of rapid price swings following a breakout from the triangle pattern. Given the high convergence of gold and silver moving averages with current prices, this month is highly likely to see a pattern of pullbacks, retests, and subsequent pullbacks; therefore, vigilance and flexible responses to potential market reversals are essential.

London Gold June Forecast Range:
Resistance: 4554 – 4649 – 4743 – 4853 – 4907
Support: 4444 – 4337 – 4243 – 4148 – 3838

London Gold June 1-5 Forecast Range:
Resistance: 4583 – 4654 – 4697 – 4739 – 4854
Support: 4511 – 4468 – 4428 – 4354 – 4284

London Gold June 1:
Forecast Early Range: 4514 – 4554
Resistance: 4567 – 4593 – 4647
Support: 4501 – 4487 – 4434

SPDR Gold Trust Gold Holdings: May 18 – 1,038.85 tons
May 19 – 1,036.85 tons
May 20 – 1,036.85 tons
May 21 – 1,037.71 tons
May 22 – 1,034.85 tons
May 26 – 1,034.85 tons
May 27 – 1,034.85 tons
May 28 – 1,032.57 tons
May 29 – 1,029.14 tons

5/29 AM London Gold Fix: $4525.75 
5/29 PM London Gold Fix: $4545.95 

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