GOLD Price Analysis – Feb 14, 2024
Daily Price Outlook
Despite the risk-off market sentiment, the Gold price (XAU/USD) failed to stop its bearish bias and hit a fresh two-month low below the $2,000 level. However, the reason for its downward trend can be attributed to bets that the Fed will keep rates higher for longer. These expectations were reaffirmed by the stronger-than-expected US CPI released on Tuesday. This hawkish stance tends to undermine gold prices. In contrast to this, the risk-off market sentiment, driven by geopolitical tensions continuing in the Middle East and Eastern Europe, was seen as a key factor that helped gold price to limit its deeper losses.
US Inflation Data Dampens Gold Price Amidst Fed's Hawkish Stance
Despite the upbeat US economic data and hawkish stance from the Federal Reserve, the broad-based US dollar failed to gain support and dropped slightly amid a modest downtick in US Treasury bond yields. The US inflation data released on Tuesday suggests that the Federal Reserve might not raise interest rates soon. This news is making gold less attractive to investors. Meanwhile, the Bureau of Labor Statistics reported that the headline US Consumer Price Index (CPI) rose by 0.3% in January and softened to a 3.1% year-over-year rate from 3.4% in December, beating expectations. This, coupled with the Core CPI surpassing consensus estimates, suggests the Fed may not rush to cut rates.
Therefore, the lowered expectations of an early interest rate hike by the Federal Reserve due to US inflation data have undermined gold prices.
Geopolitical Tensions Support Gold; Traders Eye Fed Speeches and Economic Data
On the flip side, the losses in the gold price could be short-lived as geopolitical tensions continue in the Middle East. Yemen's Houthis have escalated attacks in the Red Sea, targeting vessels with ties to the US, Britain, and Israel. Israel's actions in Gaza have led to casualties among Palestinian people, hindering truce negotiations. This instability tends to support safe-haven assets like gold.
Looking ahead, traders will focus on speeches by Fed officials Goolsbee and Barr on Wednesday. They'll also keep an eye on US January Retail Sales on Thursday and the Producer Price Index (PPI) on Friday, expecting a 0.1% MoM and 0.6% YoY rise in January.
GOLD (XAU/USD) - Technical Analysis
On February 14, Gold (XAU/USD) presented a static performance, maintaining its position at $1992.855, illustrating a market in equilibrium without any significant change. This stability occurs amidst a complex backdrop of global economic uncertainty and fluctuating interest rates, impacting investor sentiment towards safe-haven assets.
Gold's current stance, slightly below the pivot point of $2004.468, suggests a critical juncture for future movements. Resistance levels are delineated at $2020.041, extending through $2031.460 to $2044.437, marking potential hurdles for bullish momentum. Conversely, immediate support forms at $1988.896, with subsequent levels at $1976.179 and $1966.166, providing a cushion against downward pressures.
The Relative Strength Index (RSI) indicates a level of 24, suggesting that Gold might be in an oversold territory, which could precede a potential upward correction. Meanwhile, the 50-day Exponential Moving Average (EMA) at $2027.198 reinforces the significance of the $2004.468 pivot point, acting as a determinant for the asset's short-term trend.
Given these observations, a cautious approach is advised. Traders might consider a buy limit at $1989, targeting a take profit at $2011, while a stop loss at $1972 could safeguard against unforeseen declines. This strategy hinges on Gold's ability to rebound from its support levels, aiming for recovery towards its immediate resistance.
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