Technical Analysis

GOLD Price Analysis – Feb 28, 2024

By LonghornFX Technical Analysis
Feb 28, 20244 min

Daily Price Outlook

Despite the recent strength of the US dollar, Gold prices (XAU/USD) continued to gain support and remained well bid around above the $2,030 level. However, this rise was attributed to long-lasting tensions in the Middle East, which bolstered the appeal of safe-haven assets such as gold. On the flip side, the US dollar gained momentum due to the Federal Reserve's hawkish stance on interest rates. This could cap gains in the gold price. Besides this, the risk-on market sentiment, supported by the Federal Reserve's hawkish outlook, was seen as another key factor that kept the lid on any additional gains in the gold price.

Looking forward, Investors are awaiting the release of the Preliminary US GDP print as well as upcoming speeches by influential FOMC members, will play a key role in driving USD demand and creating meaningful trading opportunities around XAU/USD. Moreover, the US Personal Consumption Expenditures Price Index will be in the spotlight.

Powell's Rate Cut Signals and Economic Indicators Impacting Gold Prices

On the US front, the Federal Reserve's recent meeting minutes and comments from officials suggest they're not in a rush to cut interest rates. This decision tends to strengthen the US dollar but can lower gold prices. However, the decrease in US bond yields, the possibility of a government shutdown, and disappointing Durable Goods Orders could weaken the dollar's strength and helps the gold price to stay bid.

On the data front, US manufactured goods orders fell by 6.1% in January, the sharpest drop in nearly four years. The Consumer Sentiment Index also fell to 106.7 for February, despite lower inflation expectations. In the meantime, the Richmond Fed's Manufacturing Index improved to -5 in February from -15, marking the fourth consecutive month of negative readings.

Therefore, the Federal Reserve's decision not to rush interest rate cuts tends to strengthen the US dollar and lower gold prices. Other factors like lower bond yields and economic data can also impact gold prices.

Geopolitical Rumors and Economic Concerns Shape Gold Prices

On the geopolitical front, the ongoing talks between Israel and Hamas about ceasefire were uncertain, indicating ongoing tensions. However, the Iran-backed Houthi group continued targeting civilian ships in the Red Sea, posing a threat to maritime security. Meanwhile, Gaza faced a humanitarian crisis, with limited access for aid organizations, and one-quarter of its population going hungry.

President Biden urged Congress to support Israel's defense and sought to cut funds to the UN agency for Palestinian refugees (UNRWA). Israeli attacks on Gaza resulted in thousands of deaths and tens of thousands of injuries. Therefore, the geopolitical tensions, particularly in the Middle East, often lead to increased investor uncertainty and risk aversion, potentially boosting demand for safe-haven assets like gold, consequently impacting its price.

Gold Price Chart - Source: Tradingview
Gold Price Chart - Source: Tradingview

GOLD (XAU/USD) - Technical Analysis

Gold's trading session concludes with a marginal uptick, marking a 0.05% rise to settle at $2030.56, reflecting the market's oscillation within a tightly bound spectrum. This subtle movement underscores the investors' wait-and-see approach, particularly as they anticipate forthcoming economic data that could sway Federal Reserve policy decisions.

The pivot point for the day is pegged at $2028.69, delineating a fine line between bullish and bearish territories. Resistance levels are staged at $2041.30, $2053.29, and $2065.71, which could act as ceilings for any upward momentum. Conversely, support is found at $2016.41, with further cushions at $2001.46 and $1988.19, marking potential zones where buyers might emerge.

Technical indicators reveal a nuanced picture: the Relative Strength Index (RSI) hovers at 51, indicating a neutral market sentiment, while the crossing below the 50-day Exponential Moving Average (EMA) at $2026.48 suggests potential bearish undertones. This development hints at a possible shift towards a selling trend if gold prices dip below the strategic level of $2029.

Given the technical landscape and prevailing market conditions, a cautious approach is recommended. Traders might consider a sell strategy below $2029, with an eye towards a take profit target at $2020 and a stop loss positioned at $2037, to navigate the anticipated fluctuations effectively.



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