Technical Analysis

GOLD Price Analysis – April 04, 2024

By LonghornFX Technical Analysis
Apr 4, 20243 min

Daily Price Outlook

Despite the bearish US dollar, the price of gold (XAU/USD) failed to gain bullish traction and remained subdued near the $2,290 level. However, the reason for its sluggish performance can be linked to the risk-on-market sentiment, which undermined the safe-haven gold price. Furthermore, increasing doubts about whether the Fed will cut rates three times this year boosted the US dollar, but it failed to limit gold losses. However, the losses in the gold price could be long-term as previously released upbeat US data validated the view that the US economy is in good shape. This makes people more confident in the US economy, which could lead to keeping interest rates high to keep things stable.

Moving ahead, traders seem hesitant to place strong positions as they prefer to wait for more cues about the Fed's rate-cut path. Hence, the focus will remain on the release of the US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) report on Friday.

Mixed Signals from Federal Reserve Impacting US Dollar and Gold Prices

On the US front, mixed messages from Federal Reserve officials have caused the US dollar to drop, which is typically good news for gold prices, but it failed to help gold prices limit their losses. It is worth noting that members of the Federal Open Market Committee (FOMC), like Fed Chair Jerome Powell, have said that rate cuts could happen in 2024, but they haven't been clear about when exactly.

Powell mentioned on Wednesday that it will take time to assess the current inflation levels and that more discussion and data are needed before deciding on rate cuts. Therefore, the mixed signals from Federal Reserve officials, indicating possible rate cuts in 2024 but lacking clarity on timing, have weakened the US Dollar. Thus, the current situation is seen as positive for gold prices but negative for the US Dollar.

Geopolitical Tensions Drive Surge in Gold Prices

On the geopolitical front, tensions between Israel and Hamas, with the potential involvement of Iran, have raised concerns about a wider conflict in the Middle East. Iran has vowed to retaliate against an Israeli attack, increasing uncertainty in the region. This has led to a surge in the price of gold, which is often seen as a safe-haven investment during times of geopolitical instability. The situation is considered positive for gold prices as investors seek safe assets amid the escalating conflict.

GOLD Price Chart - Source: Tradingview
GOLD Price Chart - Source: Tradingview

GOLD (XAU/USD) - Technical Analysis

Gold's market sentiment reflects cautious optimism as it trades at $2,296.65, down 0.24%, closely watching the pivotal $2,305 mark. The commodity's slight retreat suggests a consolidation phase, with investors gauging the balance between bullish momentum and potential corrective pressures.

The key resistance levels at $2,315, $2,332, and $2,348 delineate the thresholds where sellers might reassert control, while immediate support at $2,286 provides a near-term floor, with further cushions at $2,265 and $2,247. The RSI at 68 edges near overbought territory, hinting at potential profit-taking or a pause in the uptrend.

The 50-day EMA of $2,261 reinforces the underlying bullish trend but also underlines the need for vigilance against pullbacks. Given these dynamics, a strategic approach would involve considering a sell position below the $2,302 threshold, targeting a take-profit level at $2,280, while setting a stop loss at $2,310 to manage risks effectively.

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