Technical Analysis

GOLD Price Analysis – April 26, 2024

By LonghornFX Technical Analysis
Apr 26, 20244 min

Daily Price Outlook

Gold price (XAU/USD) succeeded in halting its downward rally and turned bullish around the $2,346 level, reaching an intraday high of $2,350.20. However, the reason for its upward trend can be associated with the mild weakness in the US dollar, which underpinned the gold as it becomes cheaper for holders of other currencies. Furthermore, the US Gross Domestic Product (GDP) report for the first quarter of 2024 indicated a notable slowdown in economic growth and an increase in inflation, which was seen as negative for gold prices, as investors may seek alternative assets to hedge against economic uncertainty.

On the flip side, the expectation that the Federal Reserve will maintain higher interest rates due to persistent inflation is supporting demand for the US dollar, which could limit losses and cap gains in the gold price. Traders prefer to wait for more cues about the Federal Reserve's rate cut path before taking a strong position.

Impact of US Economic Data and Federal Reserve Expectations on Gold Prices

Despite hawkish comments from Fed officials, the broad-based US dollar has experienced a downtick amid disappointing GDP growth and higher-than-expected inflation figures, providing some support to gold prices. On the data front, the US economy grew slower than expected in the first quarter of 2024, expanding by only 1.6%, compared to the previous 3.4%. This was below market expectations of 2.5%.

Despite sluggish growth, prices remained high, with the Personal Consumption Expenditures Price Index climbing by 3.4% annually, surpassing the Fed's 2% target. As a result, the US dollar fell to a two-week low around mid-105.00, following the release of disappointing GDP growth and higher-than-expected inflation figures.

Therefore, the modest downtick in the US dollar, driven by disappointing GDP growth and higher-than-expected inflation, has provided support to gold prices amid upbeat economic data and hawkish Fed comments.

Meanwhile, the financial markets are not expecting the US Federal Reserve to cut interest rates in June, with less than a 10% chance priced in. The probability of a rate cut in September is also low, dropping below 58%. Investors are eagerly awaiting another inflation report due on Friday, which is expected to show a 0.3% monthly increase in both headline and core Personal Consumption Expenditures (PCE). Yearly estimates suggest a 2.6% rise in headline PCE and a 2.7% increase in Core PCE, indicating ongoing inflation concerns.

Consequently, the low expectations for US Federal Reserve rate cuts and ongoing inflation concerns, as indicated by upcoming inflation reports, may support gold prices amid market uncertainty and inflation worries.

Geopolitical Tensions in the Middle East and Gold Prices

On the geopolitical front, tensions in the Middle East have cooled slightly but remain a concern. The eastern part of Rafah is experiencing constant artillery shelling amid Israeli plans for a ground invasion, despite international warnings. The United Nations is seeking legal possession of evidence from Gaza's mass graves for potential investigations, with the Palestinian Civil Defence offering cooperation. In response to President Biden's announcement, the US has initiated pier construction in Gaza for maritime aid delivery. Hamas has expressed willingness to release captives but insists on a ceasefire as a condition.

Therefore, the ongoing tensions in the Middle East, highlighted by the situation in Rafah and Israeli plans for a ground invasion, alongside international concerns and humanitarian efforts, may contribute to market uncertainty and potentially support gold prices as a safe-haven asset.

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

GOLD (XAU/USD) - Technical Analysis

On April 26, the price of gold marginally increased to $2,334.76, up 0.17%, reflecting modest market movements amidst varying global economic signals. Currently, the pivot point is set at $2,328.74, which serves as a crucial juncture for determining the metal's short-term trajectory.

Gold's immediate resistance lies at $2,356.18, with subsequent levels at $2,400.53 and $2,444.27. These resistance points are crucial markers that could dictate the pace of price ascensions if surpassed. Conversely, support levels are established at $2,292.92, $2,253.78, and $2,220.76. A breach below these could suggest a bearish turn, pressuring gold prices further.

From a technical perspective, the Relative Strength Index (RSI) at 50 indicates a balanced market condition, neither overbought nor oversold, suggesting that gold is currently in a state of equilibrium between buyers and sellers. Additionally, the 50-Day Exponential Moving Average (EMA) stands at $2,340.20, slightly above the current price, suggesting slight bearish pressure but also potential for upward movement if gold breaks through this average.

Given these indicators, the recommended trading strategy would be to initiate a buy above the pivot point of $2,328, with a target profit at $2,380 and a stop loss at $2,290.

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- GOLD Price Analysis – April 25, 2024



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