GOLD Price Analysis – Feb 13, 2024
Daily Price Outlook
Despite the bullish US dollar, Gold prices (XAU/USD) managed to top their downward bias and turned bullish above the $2,029 level. However, this increase was fueled by escalating Middle East tensions, which boosted the appeal of safe-haven assets, including gold. In the meantime, the US Dollar is gaining strength thanks to the Federal Reserve's hawkish stance on interest rates and upbeat US economic data. This strong US dollar was seen as a key factor limiting additional gains in gold prices. Moving on, investors are waiting for the release of the United States Consumer Price Index (CPI) data for January. This upcoming data keeps investors hesitant to take any strong position.
Powell's Rate Cut Signals and Economic Indicators Impacting Gold Prices
On the US front, anticipation of inflation, meaning expectations for the prices of goods and services to rise, has reduced expectations of a March rate cut by the Fed, dampening Gold's appeal. Markets now only give a 14% chance of a rate cut in March but estimate a 60% chance for May. Dallas Fed President Logan sees no urgency for rate cuts, noting progress in controlling inflation but seeks more evidence for sustainability.
Hence, the anticipation of reduced rate-cut expectations by the Fed lifts the US dollar but lowers Gold prices due to lower inflation concerns. On the data front, US annual headline inflation is expected to slow to 2.9% from 3.4%, with core inflation decreasing to 3.7% from 3.9%. Monthly CPI forecasts project 0.2% for headline and 0.3% for core. Hence the expected decrease in inflation is negative for gold due to reduced inflation hedging demand.
Geopolitical Rumors and Economic Concerns Shape Gold Prices
The price of gold faced downward pressure initially but rebounded briefly as escalating geopolitical tensions in the Middle East lent some support to the safe-haven gold. It is worth mentioning that Yemen’s Houthi rebels reportedly launched missiles at a ship bound for a port in Iran. Meanwhile. Israel conducted a series of airstrikes in the southern Gaza city of Rafah on Monday. Israeli Prime Minister Benjamin Netanyahu expressed his intention to escalate military operations in Rafah after rejecting a ceasefire proposal from Hamas. This can dampen further risk sentiment in the market and boost the gold price.
GOLD (XAU/USD) - Technical Analysis
The precious metal, gold, edges modestly higher, with its price at $2,021.495, marking a slight increase of 0.07%. In the four-hour chart, gold faces a crucial pivot point at $2,025.842, indicating a delicate balance between bullish and bearish forces in the market. Resistance levels loom at $2,037.942, $2,052.311, and $2,065.339, challenging gold to sustain its gains. Conversely, support levels are established at $2,012.170, $2,002.839, and $1,993.332, providing potential floors should the metal retreat.
Technical indicators offer mixed signals; the Relative Strength Index (RSI) stands at 45, suggesting a neutral market sentiment. The 50-day Exponential Moving Average (EMA) at $2,028.366 acts as a near-term resistance, hinting at a tussle between current prices and moving average levels.
Given these observations, the technical outlook for gold appears cautiously bearish, with a recommended sell limit at $2,026. Traders might consider setting a take profit at $2,006 and a stop loss at $2,036 to manage risk. This setup reflects the market's current uncertainty, with investors closely monitoring resistance and support levels for directional cues.
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