Gold Prices Plummet as Risk Appetite Returns
Gold prices experienced notable pressure this week, declining by more than 4% as investor sentiment showed improvement. On Friday alone, the price of gold dropped over 1.5%, mainly due to a changing market atmosphere that favored riskier investments.
Currently, XAU/USD is trading at $3,187, having reached a high of $3,252 earlier in the day.
The downturn began with positive news on the US-China trade front, where an agreement to reduce tariffs by 115% led investors away from safe-haven assets. Throughout the week, gold fluctuated within a $3,120-$3,265 range, but sustained buying pressure failed to materialize.
Economic Data & Market Sentiment
The University of Michigan’s Consumer Sentiment Index notably fell to 50.8 in May—the lowest since July 2022—highlighting increased pessimism among American households. Inflation expectations climbed, with one-year projections rising from 6.5% to 7.3%, and five-year expectations ticking up from 4.4% to 4.6%.
US economic data was mixed: retail sales slowed significantly, rising just 0.1%, while Housing Starts increased modestly by 1.6% MoM but missed estimates. Conversely, Building Permits declined by 4.7%, indicating potential future weakness in housing construction. Import prices rose marginally by 0.1%, slightly exceeding forecasts.
Despite mixed signals, US Treasury yields stabilized at around 4.437%, and real yields settled at 2.0907%. The US dollar strengthened due to weakened consumer sentiment and continued Federal Reserve caution expectations.
Technical Outlook for Gold
Technically, XAU/USD faces significant resistance around the $3,200 mark. A potential “double top” formation threatens further downside if gold cannot sustain a close above this critical level. Immediate support lies at the 50-day SMA near $3,155, followed by the psychological $3,100 barrier. Should prices decisively break $3,200, the next significant resistance would appear at the May 14 high ($3,257) and subsequently at $3,300.
US Dollar Holds Steady Despite Weak Sentiment
Despite the disappointing University of Michigan Consumer Sentiment figures, the US Dollar Index (DXY) maintained slight weekly gains, hovering around the 101.00 level. President Trump’s announcement of new tariffs added uncertainty to the outlook. Technical indicators currently suggest a neutral stance with a mild upward bias.
Cryptocurrency Market Highlights
Bitcoin (BTC): Bitcoin’s short-term outlook shows a gradual uptrend on the one-hour chart, with higher lows and highs since May 16. Key resistance is at $104,094, and support is at $102,668. Small-bodied candlesticks indicate market indecision, while a breakout above $104,100 on high volume could signal a long entry.
Conversely, a drop below $103,000 might suggest a bearish reversal. On the daily chart, Bitcoin maintains a bullish trend, rising from April lows near $83,000 to a peak of $105,706. Current price action indicates sideways movement, with declining volume potentially signaling buyer fatigue. A close above $105,706 with substantial volume would confirm bullish momentum, while a fall below $102,000 on rising volume could lead to a deeper retracement toward the $98,000 to $100,000 range.
Ethereum (ETH) saw renewed buying interest, particularly from whale investors, resulting in a significant net exchange outflow of approximately 230,000 ETH. This suggests increasing investor confidence and potentially points toward further price consolidation or appreciation around the critical $2,530 support level.
Regulatory & Institutional News
SEC Eyes New Crypto Rules
The US Securities and Exchange Commission (SEC) announced plans to introduce clear regulatory frameworks for crypto tokens, including issuance, custody, and trading rules. This aims to bring greater transparency and investor protection to the crypto space.
Coinbase Acquires Deribit for $2.9B
Coinbase plans to buy Deribit, a crypto derivatives exchange based in Dubai, for $2.9 billion. This important deal will help Coinbase capitalize on institutional investors’ increasing interest in crypto options trading.
Looking Ahead
Next week will be crucial, with speeches from several Federal Reserve officials, alongside flash PMI data and further housing market reports. Traders should closely monitor these updates, as they could significantly influence market sentiment and price movements across various asset classes. Ensure you are ready for the volatility of the 22nd of May due to the Unemployment Claims, Flash Manufacturing PMI, and Flash Services PMI.
Conclusion
This week, risk appetite recovered, significantly impacting gold prices while stabilizing the US dollar. Cryptocurrencies displayed mixed signals, with Ethereum experiencing fresh institutional buying. Market participants should remain cautious and attentive to forthcoming economic data and geopolitical developments, which may dictate the next directional moves.
