Technical Analysis

GOLD Price Analysis – Feb 09, 2024

By LonghornFX Technical Analysis
Feb 9, 20243 min

Daily Price Outlook 

Gold price (XAU/USD) failed to stop its declining streak and remained well offered around the 2,031 level. However, the reason for its bearish rally can be tied to the risk-on market sentiment, which was backed by the upbeat US economy data. The risk-on tone in the market tended to undermine safe-haven gold prices. Furthermore, the broad-based US dollar bullish bias was seen as another key factor that kept the gold price lower. The incoming stronger US macro data, along with hawkish remarks by a slew of influential FOMC members, suggested that the Federal Reserve (Fed) will keep interest rates higher for longer. This boosted the US dollar and pushed the precious metal under pressure.

Impact on Gold Prices of Reduced Expectations for Fed Rate Cuts

The broad-based US dollar maintained its upward trend and remained steady below its three-month peak as uncertainty loomed over the Fed's stance on interest rate cuts. Meanwhile, the previously released strong US economic data and upbeat remarks from Fed officials are reducing expectations for aggressive rate cuts this year, which is bearish news for gold. Fed Chair Jerome Powell's recent statement dashed hopes for a rate cut in March.

Therefore, the news of reduced expectations for rate cuts and Fed's cautious stance lifted the US dollar, dampening gold's appeal as an alternative investment, likely leading to further downward pressure on gold prices.

Impact of Strengthening US Dollar and Reduced Likelihood of Fed Rate Cut on Gold Prices

Despite ongoing conflicts in the Middle East, the market sentiment gained momentum, driven by positive earnings and jobs data. Meanwhile, the Fed and ECB are cautious about rate cuts, given inflation concerns. The probability of a March Fed rate cut dropped to 16.5%. Therefore, the strengthening U.S. dollar and reduced likelihood of a Fed rate cut may diminish the appeal of gold as a safe-haven asset, potentially leading to downward pressure on gold prices.

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

GOLD (XAU/USD) - Technical Analysis

In the world of precious metals, Gold (XAU/USD) presents a complex narrative, with the latest figures showing a nominal decrease of 0.04%, placing the metal at $2,034.37. As we delve into the four-hour chart, the pivot point at $2,016.84 stands as a sentinel for price movements, marking the battleground between bulls and bears.

The immediate resistance level breathes at $2,042.63, with subsequent layers of resistance standing at $2,064.12 and a more formidable $2,087.77. These levels are the gates that bulls must charge through to signal a stronger market conviction. On the other hand, the gold price finds its support at $1,994.27, with further potential safety nets at $1,969.55 and $1,945.90, which could catch a bearish descent.

The Relative Strength Index (RSI) hovers around the midpoint, indicating a market in balance, while the MACD's positive divergence from its signal line at 0.200 against -0.365 suggests a simmering bullish momentum under the surface.

The 50-Day EMA at $2,033.06 serves as both a support and resistance level, acting as a pivot for gold's short-term trajectory. A close below this level might entice bears, signaling a potential downtrend.

Yet, within this technical framework lies a cautionary tale; the 50 EMA's proximity poses a resistance challenge, where a conclusive close below could spur a trend reversal favoring the bears.

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