Gold – despite a thick cloud of daily activity and a sharp pullback, the current recovery appears weak

Gold prices edged higher in early trading on Monday following last week’s 5% pullback from a new record high, finding solid support at $2327/25, the top of the thick rising daily Ichimoku cloud.

Partial profit-taking lifted the price, though the recovery remains mild and is encountering resistance from the initial barrier provided by the 20-day moving average (20DMA) at $2348.

Technical indicators on the daily chart show positive momentum and an oversold stochastic, which support a recovery. However, the mixed setup of the moving averages clouds the bullish outlook.

For the recovery to solidify, it needs to close above the upper pivots at $2373/76 (38.2% Fibonacci retracement of $2450/$2325 and the 10DMA), which would strengthen the structure and pave the way for an attack on the next key barriers at $2387 (50% retracement) and $2400/02 (psychological level and 61.8% Fibonacci retracement). Surpassing these levels would signal the end of a healthy correction and shift the near-term focus fully to the upside.

Conversely, the downside remains vulnerable under the current configuration, but the daily cloud offers good support, and near-term action is expected to remain biased higher as long as the price stays above the cloud.

Due to lower volumes from the US holiday, the metal’s action is likely to be quieter on Monday, while traders await the release of the US PCE Index, the Fed’s preferred inflation gauge, due on Friday, May 31. This data will provide more details about the Fed’s actions in the coming months and generate stronger directional signals.

Caution is advised as penetrating the rising daily cloud would increase downside risk, exposing key support levels at $2300 (psychological level and 55DMA) and $2277/72 (recent range floor and 38.2% Fibonacci retracement of $1984/$2450).

Res: 2348; 2363; 2376; 2387
Sup: 2332; 2320; 2300; 2277