GOLD Price Analysis – Feb 29, 2024

Daily Price Outlook

Despite the recent strength of the US dollar and the Fed’s higher-for-longer interest rates narrative, gold prices (XAU/USD) extended their upward trajectory and remained steady above the $2,035 level. This rise was attributed to prolonged tensions in the Middle East, which bolstered the appeal of safe-haven assets such as gold. In the meantime, cautious sentiment prevails in the market ahead of the release of the US Personal Consumption Expenditures (PCE) Price Index, which could provide cues about the Federal Reserve's rate-hike path. This keeps investors cautious, leading them to invest in gold as a safe-haven asset.

In contrast to this, the Fed's hawkish outlook on interest rates was seen as a key factor that capped further gains in the gold price. Furthermore, the second estimate of US GDP growth for Q4 showed a 3.2% rise, slightly lower than the original 3.3%, but still signals economic strength. Hence, the positive US GDP growth indicates a hawkish stance from the Fed regarding rate cuts. As a result, the US dollar gained momentum and remained steady.

Investors are awaiting the US Personal Consumption Expenditures (PCE) Price Index. Meanwhile, the release of Weekly Initial Jobless Claims, the Chicago PMI, and Pending Home Sales, which, along with Fed speak, will also be in the spotlight.

US Federal Reserve Outlook and GDP Data Impact on Monetary Policy and Market Dynamics

On the US front, Federal Reserve officials stressed the need to tackle inflation further, signaling that interest rates may stay higher for longer. New York Fed President John Williams suggested rate cuts might start in 2024, likely in the second half, as inflation hits its 2% target unevenly. Atlanta Fed President Raphael Bostic expressed a preference for patience in policy adjustments, underscoring that the battle against inflation isn't won yet. Meanwhile, Boston Fed Bank President Susan Collins indicated a likelihood of rate cuts this year but stressed the importance of data assessment before any policy changes are made.

On the data front, the second estimate of US GDP growth released on Wednesday showed that the economy grew by 3.2% in the fourth quarter, just a bit lower than the initial report of 3.3%. This data suggests that the US economy is still doing well overall. However, it reinforced hawkish Fed expectations, which tend to strengthen the US dollar and lower gold prices.

Geopolitical Tensions in Gaza: Impact on Stock Market and Safe-Haven Assets

On the geopolitical front, Israeli airstrikes and shelling hit Nuseirat, Bureij, and Khan Younis camps in Gaza, resulting in at least 30 deaths. According to the Gaza Health Ministry and MSF, Save the Children, a charity organization for children, warns of a slow-motion mass killing of children in Gaza. Six children in north Gaza died from dehydration and malnutrition, with Gaza's healthcare system on the brink of collapse. Samantha Power of USAID stresses the urgent need for more aid to Gaza. Since October 7, Israeli attacks in Gaza have left nearly 30,000 people injured and over 70,000 displaced, while 1,139 have died in Israel.

Therefore, this news is likely to have a negative impact on risk sentiment in the stock market and may boost safe-haven assets like gold due to increased geopolitical tensions and uncertainty.

GOLD (XAU/USD) - Technical Analysis

Gold's price on February 29 edged higher by 0.07%, marking a subtle increase to $2035.805. This incremental rise reflects a cautiously optimistic sentiment among investors, as gold continues to be a focal point in the financial markets amidst ongoing global economic uncertainties.

The pivot point for gold is established at $2025.07, providing a baseline for the day's trading dynamics. Resistance levels are identified at $2040.44, $2053.29, and $2065.71, outlining potential ceilings that gold prices might encounter should the upward momentum persist. Conversely, support levels are placed at $2016.41, $2001.46, and $1988.19, indicating key thresholds where buying interest could re-emerge, potentially stabilizing prices.

The Relative Strength Index (RSI) at 55 suggests a balanced market condition, leaning slightly towards a bullish bias without entering overbought territory. The 50-day Exponential Moving Average (EMA) at 2028.050 closely aligns with the current price, further reinforcing the gold market's current stability and slight bullish inclination.