Gold struggles to stretch gains amid improved market sentiment
After losing nearly $20 on Thursday, the ounce of gold rebounded on Friday, with the XAU/USD pair reaching its session high at $1256. However, the pair failed to extend its gains as the 50-DMA, which is sitting near the session high, formed a strong resistance. At the moment, the XAU/USD was trading at $1253, up 0.5% on the day.
The pair is struggling to set a short-term direction as the weakness of the USD is countered by the rising risk appetite. In his recent comments, the Federal Reserve Bank of St. Louis President James Bullard said that there was no indication of the low unemployment level raising the risk of a faster than desired inflation and argued that the Fed may be moving too fast for economic conditions. Bullard's dovish tone triggered a USD sell-off, pushing the US Dollar Index to a fresh 6-month low at 97.12. As of writing, the index is at 97.15, losing 0.63% on the day.
On the other hand, the equity indices in the U.S. are rising on Friday as the easing political concerns allow the investors to return to riskier assets, hurting the demand for the safe haven gold. At the moment, the Dow Jones Industrial Average is adding 0.55% while the S&P 500 Index is gaining %0.75.
Technical outlook
The pair could face the initial resistance at $1256 (50-DMA), ahead of $1265 (May 18 high) and $1271 (Apr. 30 high). To the downside, could be seen at $1242 (20-DMA), $1231 (200-DMA) and $1217 (May 11 low).
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
