GOLD Price Analysis – April 01, 2024
Daily Price Outlook
Gold prices (XAU/USD) have maintained an upward trend and hitting an intraday high near the $2,265 level. However, the reason behind this surge is increasing speculation about a Federal Reserve rate cut in June. This sentiment is fueled by the latest US inflation data, particularly the moderate increase in the Personal Consumption Expenditures (PCE) Price Index in February, which rose to 2.5% annually. This reinforces expectations that the Fed may cut interest rates to counter inflationary pressures.
Furthermore, the geopolitical tensions, such as the Russia-Ukraine conflict and conflicts in the Middle East, have increased uncertainties in global markets. During such times, investors often turn to safe-haven assets like gold, boosting demand and pushing prices higher.
Rising Bets for a June Fed Rate Cut and Impact on Gold Price
On the US front, the market is increasingly pricing in the possibility of a June interest rate cut by the Federal Reserve in the US. This sentiment was reinforced by Fed Chair Jerome Powell's remarks on the latest inflation data aligning with the Fed's objectives. According to the CME Group's FedWatch Tool, there's approximately a 70% probability of a rate cut at the June monetary policy meeting.
Therefore, the anticipation of lower interest rates tends to weaken the US Dollar, making gold more attractive to investors as it becomes cheaper to buy.
Risk-On Mood and Modest USD Uptick Impact on Gold Price
Despite the risk-on sentiment in the market, supported by upbeat Chinese manufacturing data and a modest uptick in the US Dollar, gold prices have remained resilient. However, the positive Chinese data, indicating an expansion in the manufacturing sector after six months, initially boosted risk-on market sentiment. In contrast to this, ongoing geopolitical tensions and inflation concerns have overshadowed this optimism, leading investors to seek safe-haven assets like gold.
Hence, the modest uptick in the US Dollar could cap gains for gold, but the risk factors and expectations of a Fed rate cut have outweighed this effect. Investors are watching upcoming economic data like the US ISM Manufacturing PMI for clues about the economy and possible changes in monetary policy.
GOLD (XAU/USD) - Technical Analysis
Gold’s performance on April 1st exhibited a notable rise, closing at $2,258.75, marking a 1.23% increase. This upward trajectory situates gold above the pivotal $2,240, indicating a persistent bullish momentum. Resistance is eyed at $2,285, $2,303, and $2,319; breaching these could foster further gains. Conversely, support positions at $2,249, $2,238, and $2,220 provide potential fallback points.
The technical landscape reveals an RSI at 81, suggesting an overbought market, which could precede a pullback. A notable Doji candlestick below $2,266 might signal a forthcoming market sentiment reversal, potentially initiating a bearish phase. Despite the bullish "three white soldiers" pattern, the market's overbought state hints at a forthcoming correction.
The 50-day EMA at $2,183 solidifies the gold's bullish trend, yet market players should stay vigilant of upcoming economic data and Fed communications, which could significantly sway market directions. The upcoming U.S. ISM Manufacturing PMI and Fed members' speeches will provide insights into economic health and monetary policy, influencing market dynamics.
Given these factors, a cautious trading strategy would be advisable. Considering selling below $2,265, targeting a take-profit at the pivot of $2,240, and setting a stop-loss at $2,285 could align with the current market's technical and fundamental outlook.
In summary, while gold maintains a bullish stance above $2,240, the heightened RSI and specific candlestick patterns suggest a potential near-term correction.
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