Technical Analysis

GOLD Price Analysis – Aug 17, 2023

By LonghornFX Technical Analysis
Aug 17, 20233 min
Signal 2023 05 25 122622 002

Daily Price Outlook

Gold price (XAU/USD) has been facing selling pressure and touches a fresh multi-month low, dropping below $1,900 level. However, this drop can be attributed to the strong performance of the US Dollar, which is gaining strength due to expectations of additional interest rate increases by the Federal Reserve. Interestingly, despite this situation, the current cautious atmosphere in the market, where investors are favoring safe-haven assets, might provide some support to XAU/USD and help minimize its losses.

US Dollar's Strength Puts Pressure on Gold Amid Inflation Battle

The US Dollar (USD) is steadily gaining strength, all thanks to the strong position taken by the Federal Reserve (Fed). Unfortunately, this is posing a bit of a challenge for Gold prices. In the recent meeting, the Fed's discussions on interest rate hikes showed some differences of opinion, but the main focus remains on taming inflation.

According to the latest data, consumer prices in the US went up slightly in July, as shown by the Consumer Price Index (CPI). Additionally, the Producer Price Index (PPI) also increased, indicating ongoing efforts to manage inflation. Consequently, Gold is finding it challenging due to the USD's strength gaining more attention, which is dimming its usual attractiveness.

Upbeat US Economic Data Weighs Down Gold Amid Rising Treasury Yields

Furthermore, the most recent data on US Retail Sales painted a positive picture, showing strong consumer spending throughout July. The broader economic indicators for the US, such as Housing Starts and Industrial Production, are also robust, underlining the economy's resilience. This, in turn, creates space for potential interest rate increases within the year.

These circumstances contribute to higher US Treasury yields, which in itself reduce the appeal of Gold – a precious metal that doesn't provide interest. Consequently, this surge in the US Dollar weakens demand for commodities like Gold (XAU/USD), intensifying the challenges faced by Gold.

China's Economic Concerns Impact Gold's Outlook

On top of that, concerns about China's deteriorating economy are causing people to shy away from riskier investments. This is reflected in somewhat weaker stock market performance, causing traders to avoid risky bets and turn towards the safety of Gold. This, in a way, does offer some support to Gold prices.

GOLD Price Chart – Source: Tradingview
GOLD Price Chart – Source: Tradingview

GOLD (XAU/USD) - Technical analysis

In a comprehensive assessment of gold's market trajectory, the precious metal has demonstrated a pronounced downturn, successfully reaching our initial anticipated benchmark at $1892.00. Currently, gold is exerting pressure on this level, aiming to validate its break beneath it. This augments the likelihood of persisting in a bearish trend, with potential descent aiming towards the subsequent target of $1873.50.

In light of these dynamics, our outlook remains bearish for the foreseeable horizon, underscored by the downward impetus provided by the 50-Day Exponential Moving Average (EMA50). It is paramount to observe that any breach of the $1905.00 level, succeeded by the $1913.15 benchmark, would arrest the anticipated decline, potentially pivoting the metal's trajectory towards an ascent.

For the day's trading landscape, we project gold's valuation to oscillate between a support threshold of $1875.00 and a resistance cap of $1905.00.



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