Gold price on the XAUUSD chart is up today as US Preliminary quarterly GDP fell to -5.0%; a figure which was below the market consensus of -4.8%. This figure represents a drop of 2 points below last quarter’s GDP of -4.8%. Today’s GDP data is considered a more complete data set than the previous month’s advance GDP data, as it took into account more information as contained in the update report of the Bureau of Economic Analysis (BEA).
The lockdowns and shuttering of businesses with attendant loss of economic activity as a result of the coronavirus pandemic are responsible for the dismal nature of the GDP data. A breakdown of the GDP report shows that there was a decrease in personal consumption expenditure, as well as reductions in the private inventory investment, imports, exports and nonresidential fixed investment components. An increase in the contributions from the residential fixed investment component, as well as a steep rise in government spending at all levels, partially offset the reduction in the contributions from the previously mentioned components. Gold price remains little changed from what it was before the news was released, but the yellow metal retains its bullish bias over the US Dollar on the day.
A look at the XAUUSD daily chart shows that gold price ticked up 0.71% today following the formation of a pinbar by yesterday’s candle, which rested on the extended trendline from the upper border of the previous symmetrical triangle pattern. This pinbar formation on a support line provides the impetus for a bullish start to the day, which has been cemented further by the US Preliminary GDP data.
However, today’s candle is now challenging resistance at 1722.30, formed by previous highs of April 30 as well as 7/8 May 2020. For gold price to continue the advance towards the next resistance target at 1738.54 (previous tops at April 16, April 23 and May 22 2020), there must be a 3% penetration close of this candle above 1722.30. The high of May 29 at 1754.04 lends itself as a potential resistance target.
On the flip side, failure to breach 1722.30 could allow for a retreat towards 1699.17, with the previous lows of April 17 and April 22 at 1680.24 also coming into focus if there is an extension of price decline. 16568.89 and 1635.53 are also potential support targets.