Technical Analysis

GOLD Price Analysis – Jan 05, 2024

By LonghornFX Technical Analysis
Jan 5, 20243 min

Daily Price Outlook

Gold prices (XAU/USD) failed to sustain their upward trend and dropped below the $2,050 level. However, the reason for their sluggish movement can be attributed to traders' caution in placing aggressive bets and a preference to wait for the release of the official monthly employment details from the United States (US). In the meantime, the widely known Nonfarm Payrolls (NFP) report will be in the spotlight, providing clarity on the Federal Reserve's future policies and influencing the short-term direction of gold. Furthermore, the reduced bets for more aggressive policy easing by the Fed are also playing a major role in undermining the gold price. In contrast to this, geopolitical risks, along with China's economic woes, continue to weigh on investors' sentiment and offer some support to the safe-haven gold price, limiting its deeper losses.

Strong US Dollar and Gold Prices Under Pressure Amid Economic Data and Fed Expectations

It's worth noting that traders have scaled back their expectations for the Fed to cut interest rates in 2024 from six times to four, thanks to positive US economic data. The recent Automatic Data Processing (ADP) report revealed that 164,000 jobs were added in December, beating the expected 115,000. Additionally, the US Department of Labor reported a drop in Weekly Jobless Claims to 202,000, surpassing expectations. While the US Dollar bulls are cautious, eagerly awaiting the official Nonfarm Payrolls (NFP) report, predictions suggest 170,000 new jobs in December. This crucial data will influence the Fed's policy and impact the USD and gold prices.

Therefore, the positive US economic data and reduced expectations for Fed rate cuts have made US Dollar strong, which kept the gold prices under pressure. Traders eagerly await the Nonfarm Payrolls report, as its outcome may influence gold prices.

Gold Faces Limited Downside Amid Positive US Labor Data

As mentioned above, the positive US labor market reports on Thursday made investors less hopeful about major US central bank interventions. This support for higher US Treasury bond yields acts as a boost for the US Dollar, keeping a lid on gold price gains. Despite this, the downside for gold seems limited due to the cautious market mood, which favors the precious metal's safe-haven appeal. The XAU/USD (Gold/US Dollar) pair remains close to a recent low reached on Wednesday, but uncertainties in the market could provide some support for gold.

  GOLD Price Chart - Source: Tradingview
  GOLD Price Chart - Source: Tradingview

GOLD (XAU/USD) - Technical Analysis

Gold's technical analysis on January 5th indicates a tentative market, with the metal trading at $2,043.36, showing no significant change in the last 24 hours. The key pivot point at $2,033 marks a critical juncture for potential movements. Resistance levels at $2,048, $2,068, and $2,083 outline the upper barriers, while support levels at $2,013, $1,992, and $1,972 provide cushions for bearish trends.

The Relative Strength Index (RSI) at 43 indicates a bearish sentiment, leaning towards oversold conditions. The Moving Average Convergence Divergence (MACD) at -0.452, significantly below the signal line of -5.444, suggests strong downward momentum. Moreover, Gold's trading below its 50-Day Exponential Moving Average (EMA) of $2,053 reinforces a bearish outlook.

Chart analysis shows no significant patterns suggesting a reversal or continuation of the trend, indicating a wait-and-see approach among investors.

In summary, the overall trend for Gold seems bearish, with a short-term strategy focusing on a sell stop at $2,035, targeting $2,017, and a stop loss at $2,054.

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