Technical Analysis

GOLD Price Analysis – April 05, 2024

By LonghornFX Technical Analysis
Apr 5, 20243 min

Daily Price Outlook

Gold price (XAU/USD) failed to stop its previous-day bearish trend and remained well offered around the $2,275 level. However, the reason for its downward rally can be attributed to the hawkish remarks by Fed officials, which underpinned the US dollar and contributed to the gold losses. Furthermore, the ongoing geopolitical tensions could help the safe-haven gold price to limit its deeper losses. Moving ahead, traders seem hesitant to place any strong position ahead of the release of the US monthly employment data, popularly known as the Nonfarm Payrolls (NFP) report due later during the North American session.

Recent Developments Impacting Gold and Market Sentiment

On the US front, Federal Reserve officials took a cautious stance on potential interest rate cuts this year, which led to some investors selling their gold holdings to secure profits, causing a decline in the price of gold. Richmond Fed President Thomas Barkin indicated a willingness to consider reducing interest rates once there is consistent improvement in inflation throughout the economy. Minneapolis Fed Bank President Neel Kashkari suggested the potential for two interest rate cuts during the year. However, he also stated that these cuts might not be needed if inflation remains steady.

This tone is considered hawkish because it suggests a reluctance to implement rate cuts unless certain conditions are met, indicating a more cautious approach to monetary policy. These hawkish remarks have kept US Treasury bond yields high, boosting the US Dollar and adding pressure on gold.

On the data front, investors are now focused on the US monthly jobs report, expected to show an addition of 200,000 jobs in March compared to the previous 275,000, with the unemployment rate holding steady at 3.9%. Market attention is also on the Average Hourly Earnings data, which will impact expectations about the Federal Reserve's rate-cutting path. This, in turn, will influence the US Dollar's movement and provide fresh momentum to the commodity market.

Escalating Geopolitical Tensions Boost Safe-Haven Appeal of Gold (XAU/USD)

On the geopolitical front, the tensions in the Middle East heightened as fears of Iranian retaliation against Israel grew after an attack on its embassy in Syria. This, along with the ongoing Russia-Ukraine conflict and a major earthquake in Taiwan, has dampened investor sentiment. These geopolitical uncertainties are expected to bolster the safe-haven appeal of gold (XAU/USD) as investors seek refuge from market volatility.

Therefore, the increasing conflicts and natural disasters make global markets nervous. Investors are turning to safe assets like gold to protect their money from risks and instability.

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

GOLD (XAU/USD) - Technical Analysis

Gold experienced a modest decline in its value, dropping 0.52% to $2,278.10. The metal's trading dynamics pivot around the $2,258 mark, setting the stage for its short-term trajectory. Immediate resistance is charted at $2,284, with subsequent barriers at $2,332 and $2,377, hinting at a stiffer challenge for bullish momentum. On the downside, support begins at $2,211, extending to $2,187 and $2,138, levels that could entice buyers if breached.

The Relative Strength Index (RSI) stands at 56, suggesting that gold is neither overbought nor oversold, providing a balanced field for traders. The 50-day Exponential Moving Average (EMA) of $2,285 nearly aligns with the current price, indicating a potential inflection point for the market's direction.

Given these indicators, the market exhibits a cautiously optimistic tone. A strategic entry for buyers would be above $2,270, targeting a profit at $2,300 while maintaining a stop loss at $2,255 to manage risks.

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