Technical Analysis

GOLD Price Analysis – April 08, 2024

By LonghornFX Technical Analysis
Apr 8, 20243 min

Daily Price Outlook

Despite the stronger US dollar, gold prices have maintained their upward trend and have been on a bullish streak, hitting a fresh all-time high around $2,353 level. This upward trend can be attributed to several factors, including expectations of lower interest rates and China's Central bank boosts gold purchases. Investors are optimistic about the Federal Reserve's stance, believing that the Fed will begin cutting rates in 2024. Investors view lower interest rates as favorable for gold, as it reduces the opportunity cost of holding the precious metal compared to interest-bearing assets like bonds.

Furthermore, the continuous surge in gold prices is further fueled by China's central bank consistently bolstering its bullion reserves for the 17th consecutive month. China's strategic accumulation of gold assets underscores its commitment to diversifying its reserve holdings, thereby exerting upward pressure on prices.

Impact of Fed Rate Expectations on Gold Prices

On the US front, the belief that the Fed will eventually implement rate cuts in 2024 has bolstered the appeal of gold as a safe-haven asset as the lower interest rates tend to weaken the value of the US dollar, making gold more attractive to international investors. As a result, gold prices have experienced upward pressure amid speculation surrounding the Fed's monetary policy stance.

In contrast, the release of positive US employment data and diminished expectations for a Federal Reserve interest rate cut in June have slightly dampened the upward momentum of gold prices. It should be noted that the anticipation of fewer rate cuts in 2024 has strengthened the US dollar and fostered a more optimistic sentiment in the market.

China's Central Bank Boosts Gold Reserves, Bolstering Prices

Another factor contributing to the rally in gold prices is the notable increase in buying activity by China's central bank. Official data revealed that the People's Bank of China boosted its gold reserves for the 17th consecutive month, signaling strong institutional demand. This surge in central bank purchases has provided further support to gold prices, reinforcing its status as a store of value and diversification tool in times of economic uncertainty.

Positive Developments in Middle East Ease Global Risk Sentiment

On the other side, the global risk sentiment improved as Israel withdrew additional soldiers from southern Gaza and expressed willingness to engage in new discussions regarding a possible ceasefire. This development has helped ease geopolitical tensions in the Middle East. As a result, investors have become more optimistic about the outlook for stability in the region, which has contributed to a positive mood in global markets. Therefore, the reduced risk of escalation in the conflict has also led to decreased demand for safe-haven assets, such as gold.

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

GOLD (XAU/USD) - Technical Analysis

The price of gold nudged higher to $2,334.43, marking a modest increase of 0.19%. With the pivot point at $2,296, gold's technical landscape suggests a cautiously bullish sentiment. Resistance levels are set at $2,364, $2,398, and $2,468, which if breached could indicate a stronger upward momentum. Conversely, support levels at $2,264, $2,194, and $2,162 provide a safety net against potential declines.

The Relative Strength Index (RSI) at 54, coupled with the 50-day Exponential Moving Average (EMA) at $2,316, underscores a balanced market dynamic, neither overly bought nor sold. This alignment suggests that gold is navigating a stable path, with a potential to oscillate around these key levels.

For traders, a cautious approach might be prudent. A sell strategy below $2,350, targeting a take profit at $2,315, with a stop loss at $2,372, could capitalize on short-term fluctuations.

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