Gold technical analysis strategy, spot gold continued its performance on May 6

Spot gold extended its strong performance, rising for a second day in a row. During the Asian trading session, gold prices rose to a new one-week high, briefly breaking through the $4,650 level and reaching $4,668.30 an ounce at 2:45 p.m. Under the combined influence of multiple factors, market sentiment has improved significantly. Gold prices have continued to rebound since hitting a more than one-month low near $4,500 on Monday, and the rebound momentum has become stronger.

Fundamental factors: A variety of factors influence the situation, with the weakness of the US dollar being the main driving force

The recent rise in gold prices can largely be attributed to the general weakness in the U.S. dollar. Growing optimism over a possible peace deal between the United States and Iran has led to lower demand for the U.S. dollar as a safe-haven currency. At the same time, lower oil prices help ease inflation concerns and reduce market expectations for a sharp interest rate hike by the Federal Reserve, which is an obvious positive factor for non-interest-bearing gold.

However, the U.S. services PMI in April was 53.6, down slightly from the previous value of 54.0, but still in the expansion range. The continued growth of the service industry shows that the fundamentals of the U.S. economy have not weakened significantly, which limits the possibility of a decline in the dollar to a certain extent.

In terms of policy, the Federal Reserve maintained interest rates at a range of 3.50% to 3.75% for the third consecutive time, reflecting its policy approach of seeking to balance inflation and growth. Notably, CME Group’s FedWatch tool shows that traders currently see a greater than 35% chance that the Fed will raise interest rates before the end of the year. This expectation may limit excessively negative expectations for the U.S. dollar and thus the potential for gold prices to rise.

Traders are currently focused on the ADP U.S. Private Sector Employment report, due later in the North American morning session, which will provide guidance for Friday’s highly anticipated non-farm payrolls report. In addition, speeches from influential FOMC members and geopolitical developments will impact dollar demand.

Technical Analysis: Strong bullish structure, but key resistance levels looming

After discussing the fundamentals, let’s look at the signals provided by the technical charts – let’s be honest, the price action over the past few days has been both exciting and cautious.

Judging from the daily chart, gold prices have successfully broken through the previous fluctuation range, and the bullish momentum has become strong. The short-term moving averages are trending higher, which is a positive sign. However, it is worth noting that gold prices are still under pressure below the midline of the Bollinger Bands indicator. In other words: Only by strongly breaking through the midline can bulls have the confidence to continue their upward momentum. The main resistance area to watch is around $4,730. A break above this level will be a key factor in determining whether the price is likely to return to the high consolidation range of $4790 to $4840.

The four-hour chart provides a clearer picture. Gold prices continue to trade above short-term moving averages, forming a bullish pattern. The Bollinger Bands are expanding upward, and gold prices fluctuate and rise above the middle line of the Bollinger Bands – this is actually a strong bullish pattern. The MACD indicator shows a bullish golden cross and the red column expands moderately, indicating strong momentum and no obvious signs of weakness. On the four-hour chart, gold prices gradually broke through the support level between $4,650 and $4,660, clearly indicating a short-term bullish trend.

Today’s gold price trend continues to fluctuate upward, showing a benign pattern of gradual rebound, consolidation and correction, and further rise. After a slight correction in the morning confirmed the support, the price gradually rose and is expected to test the upper resistance level during the European and American hours. In the absence of major negative news, losses are expected to be limited and buyers will dominate today’s trading.

As the price of gold rises, combined with the previous technical stability signals, various technical indicators on the daily chart and 4-hour chart begin to gradually turn upward. Therefore, my personal short-term trading strategy is to continue the uptrend while not ignoring the overhead resistance. The main resistance level worth watching now is between 4720 and 4730. If the price can hold above 4730, buyers may return to the previous consolidation range between 4790 and 4840, opening up new horizons.

May 6 Gold Trading Strategy

Trading idea: The price of gold has risen to the key resistance level, and the fundamentals are affected by the expectation of the Federal Reserve to raise interest rates. It is recommended to sell on highs and buy on lows as a supplement. Please manage your position size and stop loss orders carefully to avoid holding losing positions.

Short selling strategy: Place a short selling order in the range of $4720-4730, with a stop loss order above $4750. Downside targets are $4680, $4660 and the $4620-4635 range.

Short buying strategy: If the gold price falls to the $4650-4660 level and stabilizes, you can consider opening a small buying position and setting a stop loss order below $4630. The target is the $4700-4720 range.

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