Gold rises to 3427.00 on Donald Trump's fiscal policies

Gold has been demonstrating monthly gains since March 2024, having increased in price by 70.73% from then on. By April 22, the gold price secured an all-time record high and a strong resistance level at $3,499.92 per ounce. Gold's rally with a finish point at an historic high began on April 9 with a strong support level at $2,971.00 per ounce. Today, May 26, the metal is trading within a channel between $3231.00 and $3427.00. During the whole previous week, the prices were showing growth from the lower boundary of this channel.

On the daily timeframe, the RSI relative strength index is equal to 50 and indicates that there is no specific direction of the price dynamics. The chart confirms the sideways movement. The four-hour RSI has a value of 64 and is in the bullish zone, showing the dominance of the average price growth over its average decline.

The moving average convergence and divergence indicator MACD is in the positive zone on the daily timeframe. Since the end of April, it has been gradually losing the buying momentum, but hasn't lost it yet, demonstrating its slight strengthening today. This points to a transition of the uptrend taken in early April into a predominantly horizontal trend. The four-hour MACD is also in the positive zone, reflecting the bullish behavior of the price and signaling the strengthening of the buying momentum in the short term.

The main risk to the dollar is related to the Trump administration's fiscal policy. The tax bill passed by the House of Representatives on Thursday, May 22, extends the 2017 tax cuts while simultaneously cutting spending on social programs. So, given the rapidly growing budget deficit and increasing debt burden on the economy, confidence in the US financial system is weakening, triggering outflows of investor capital to other traditionally safe markets.

The outlook for the gold price is optimistic, considering the fragile market sentiment towards US assets caused by a potential $4 trillion increase in the sovereign debt limit.

Trading strategy option: buy at current price with a Take Profit at 3427.00 and a Stop Loss at 3300.00.