Gold Price Analysis – Feb 20, 2024

Daily Price Outlook

Gold prices failed to maintain their upward trend and lost some traction, falling below the $2,010 level. However, the upward trend in gold prices was mainly supported by the renewed strength of the US dollar. The US dollar gained traction on Monday in the wake of strong inflation data. Furthermore, the long-lasting tussle between Israel and Hamas created uncertainty in the market, which was seen as another key factor that lent some support to safe-haven assets like gold.

Potential Impact of Strong US Dollar on Gold Prices

The broad-based US dollar maintained its upward trend and edged higher on Monday, buoyed by robust inflation data. With US markets closed for Presidents' Day, trading volumes remained low. The dollar index, which measures the greenback against six major currencies, rose slightly to 104.35. It had reached a mid-November peak of 104.97 last Tuesday after strong inflation figures tempered expectations of Federal Reserve interest rate cuts.

Market focus now turned to the release of the Federal Open Market Committee meeting minutes for further understanding into future rate moves. Analysts predict the Fed will start cutting rates from July 2024, with a 53% chance of a 0.25% reduction by June. Despite recent dovish comments from Fed officials, including San Francisco Fed President Mary C. Daly and St. Louis Fed President James Bullard, the US dollar remained bullish on the day.

Therefore, the strengthening US dollar, driven by robust inflation data and tempered rate cut expectations, exerted downward pressure on gold prices, as investors may opt for the dollar as a safe-haven asset.

Potential Positive Impact on Gold Prices Due to Escalating Conflict in Gaza

On the flip side, the conflict in Gaza worsens as Israel continues its attacks, causing heavy losses for Palestinians. UNICEF fears more children could die, and many European countries want the fighting to stop immediately. The US suggests a ceasefire at the UN, contradicting Algeria's idea. Israel also strikes Lebanon, claiming it's targeting Hezbollah, but innocent people are getting hurt. Netanyahu says he won't stop until Hamas is completely defeated. Efforts to make peace and free hostages aren't progressing well, leading to more tension and fighting between Israel and Hezbollah every day.

Hence, the escalation of conflict and geopolitical tensions typically increases demand for safe-haven assets like gold, so this news could be viewed positively for gold prices.

Gold - Technical Analysis

In Tuesday's trading session, gold slightly advanced, marking a modest uptick to $2,019.09, reflecting a 0.08% gain. This nuanced movement suggests a restrained investor sentiment as gold navigates near pivotal technical thresholds. The session's pivot point stood at $2,031.00, serving as a critical marker for gold's immediate direction.

Immediate resistance levels identified at $2,031.74, followed by higher marks at $2,044.26 and $2,057.94, outline potential ceilings that gold may encounter should bullish momentum take hold. On the flip side, support is established at $1,999.35, with further levels at $1,984.38 and $1,973.46, indicating regions where buyers might find value, potentially halting declines. The Relative Strength Index (RSI) reading at 60 leans towards a bullish bias yet signals a degree of market equilibrium, suggesting investors are weighing their moves cautiously. The 50-Day Exponential Moving Average (EMA) at $2,014.40 acts as a foundational support level, hinting at an underlying market strength.

This technical landscape points to a cautiously optimistic scenario for gold, recommending a strategic entry for bullish positions above $2,014, targeting profits at $2,031, and securing positions with a stop loss at $2,000. Such an approach underscores a methodical engagement with the market, aiming to leverage gold's potential upswing while safeguarding against downside risks. This nuanced analysis encapsulates the current state of gold trading, highlighting key technical indicators and strategic insights for navigating the market's uncertainties.