GOLD Price Analysis – Feb 26, 2024

Daily Price Outlook

Despite the continued geopolitical tensions, the Gold price (XAU/USD) failed to stop its bearish bias and remained well below 2,030 level. However, the reason for its downward trend can be attributed to hawkish Fed expectations. These expectations were reinforced after the number of Fed officials indicated that they're not likely to cut interest rates right away as they're focused on getting inflation back to the 2% target. This hawkish stance tends to undermine gold prices. On the positive side, the escalation of military action in the Middle East and the prolonged Russia-Ukraine war was seen as a key factor that helped gold price to limit its deeper losses.

US Dollar Declines Amidst Fed's Firm Stance: Impact on Gold Prices

Despite positive US economic indicators and a hawkish stance from the Federal Reserve, the US dollar experienced mild declines at the start of new week. This decline, combined with rising demand for traditional safe-haven assets, helps gold price to limit its losses. However, expectations that the Federal Reserve will delay interest rate cuts until the June policy meeting have limited losses in the US dollar, which ultimately is not good for gold.

It should be noted that the January FOMC meeting minutes showed that policymakers want more confidence in declining inflation before considering rate cuts. In the meantime, several Fed officials have suggested that immediate rate cuts are unlikely as the central bank aims to return inflation to the 2% target. Consequently, reduced expectations of an early interest rate hike by the Federal Reserve due to US inflation data have weighed on gold prices.

Geopolitical Tensions Heighten: Impact on Safe-Haven Assets like XAU/USD

On the positive side the losses in the gold price could be temporary as the ongoing geopolitical tensions in both the Middle East and the Russia-Ukraine conflict could potentially lend support to the safe-haven XAU/USD. Israel's announcement of its intention to expand operations against Hamas amidst uncertainty surrounding a ceasefire, coupled with reports of Russia preparing for a new offensive against Ukraine, further exacerbates geopolitical anxieties.

Furthermore, recent military actions by the US and UK against Houthi sites in Yemen, in response to ongoing attacks on commercial vessels by Iran-backed Houthi rebels, add to the current geopolitical instability. Hence, these actions contribute to geopolitical instability, which often increases demand for safe-haven assets like gold, potentially leading to higher prices.

GOLD - Technical Analysis

Gold's market behaviour on February 26 showcases a minor decrease, with the price settling at $2032.83, reflecting a modest retreat of 0.13%. This movement is captured within a four-hour trading window, highlighting a pivotal moment at a pivot point of $2027.13. This point serves as a critical juncture for traders, marking the threshold between potential gains and losses.

In this trading environment, resistance levels are staged at $2041.30, $2053.29, and $2065.71, each representing barriers to upward momentum. Conversely, supports are found at $2015.06, $2001.46, and $1988.19, suggesting foundational levels that could arrest declines. The Relative Strength Index (RSI) at 57 signals a market in equilibrium, neither overbought nor oversold, while the 50-day Exponential Moving Average (EMA) at $2022.65 indicates a supportive trend for buyers.

Given these dynamics, the outlook for gold appears cautiously optimistic, proposing a strategic entry for buyers at a buy limit of $2027. This approach is fortified by a proposed take-profit target at $2040 and a stop loss at $2017, crafting a calculated framework for engagement with gold's immediate future in the market. This trading strategy, delineated by key technical indicators and price levels, underscores a nuanced understanding of gold's current position and its potential trajectory, balancing risk with opportunity.