Technical Analysis

GOLD Price Analysis – Feb 08, 2024

By LonghornFX Technical Analysis
Feb 8, 20243 min

Daily Price Outlook 

Gold price (XAU/USD) failed to halt its previous downward trend and dropped significantly to around the $2,027 level. However, the reason for its decline can be attributed to the bullish US dollar, which has been gaining momentum thanks to recent upbeat US macro data, along with hawkish remarks by several Federal Reserve (Fed) officials. These factors tend to support the US dollar and contribute to the losses in gold prices. Additionally, Israeli Prime Minister Benjamin Netanyahu rejected Hamas' ceasefire offer. This decision is likely to create uncertainty in the market and may help limit gold's deeper losses.

Impact of Federal Reserve's Monetary Policy Statements on Gold Prices

The Federal Reserve, the central bank of the United States, has recently signaled that they are cautious about lowering interest rates quickly in 2024. This cautious stance has caused pressure on the price of gold.

Fed Chair Jerome Powell mentioned that they will be careful about reducing interest rates because the economy is currently performing well. Even though some officials, like Fed Governor Adriana Kugler, believe that inflation is getting better, they might still consider lowering rates if inflation slows down further. Many investors in the market anticipate this possibility, which supports the XAU/USD pair, a measure of gold's value against the US dollar.

Minneapolis Fed President Kashkari stated that the Fed needs more time to understand where inflation is heading before considering rate cuts. He suggests they might need to lower rates two or three times in 2024 based on current information.

Boston Fed President Collins mentioned that the likelihood of inflation surpassing 2% has decreased, but reaching the 2% target could still be challenging. She believes they require more evidence before deciding on rate cuts. In summary, the Fed is waiting for more data on inflation before making significant policy changes.

Israel's Rejection of Hamas Ceasefire Proposal and Potential Impact on Gold Price

Israeli Prime Minister Benjamin Netanyahu has turned down a ceasefire proposal from Hamas, the group governing Gaza. Meanwhile, US Secretary of State Antony Blinken hinted at the possibility of further discussions. Khalil Al-Hayya, leading Hamas, is set to meet with Egypt and Qatar in Cairo soon. While Netanyahu rejected the offer, Qatar has shown optimism about Hamas's response. Israel's rejection of this proposal may introduce uncertainty, potentially bolstering the price of gold amid heightened geopolitical tensions.

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

GOLD (XAU/USD) - Technical Analysis

In the financial world, where volatility is the only constant, Gold's behavior on February 8 offers a glimpse into the complex interplay of market forces. The precious metal recorded a minor decline, settling at $2,033, down by 0.11%. This subtle movement belies the underlying tensions between bullish optimism and bearish caution, as investors parse through Federal Reserve signals and global economic indicators.

At the heart of today's analysis is the pivot point at $2,031.61, a fulcrum around which Gold's immediate future pivots. Resistance levels at $2,042.53, $2,049.99, and $2,058.63 delineate the barriers to upward momentum. Conversely, support at $2,022.75, followed by $2,015.15 and $2,007.03, outlines potential fallback positions. The Relative Strength Index (RSI) and the proximity of the 50-Day and 200-Day Exponential Moving Averages at $2,033.85 and $2,033.08, respectively, reinforce a cautiously optimistic outlook, suggesting that Gold may indeed test these thresholds shortly.

Given the current landscape, a strategic approach suggests a Sell Stop at $2,030, with a Take Profit target set at $2,017 and a Stop Loss at $2,040. This tactical positioning anticipates potential fluctuations, aiming to capitalize on the anticipated resistance challenge.

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