Technical Analysis

GOLD Price Analysis – Jan 10, 2024

By LonghornFX Technical Analysis
Jan 10, 20244 min

Daily Price Outlook

Gold price (XAU/USD) extended its two-day winning streak and attracted additional buying interest around the $2,033 level during the early European session on Wednesday. However, the upward movement was primarily driven by geopolitical risks, China's economic challenges, and a more cautious risk sentiment, all of which favor the safe-haven commodity. Meanwhile, diminished expectations for an early interest rate cut by the Federal Reserve (Fed) are dampening investor sentiment. This is evident in the weaker tone observed in the equity markets, providing some support for the safe-haven precious metal.

Current Economic Indicators and Uncertainties Impacting Gold Prices in 2024

It's worth noting that the likelihood of the Federal Reserve adopting a more aggressive approach to cutting interest rates in 2024 is decreasing. This is because the economy remains resilient, and investors are exercising caution amid uncertainties about the Fed's future actions. The US Dollar is trading close to a recent high and is bolstered by elevated Treasury bond yields. This situation could limit the appeal of gold, which is priced in US Dollars. The timing of potential rate cuts by the Fed remains unclear, as indicated by the recent decline in consumer inflation expectations. Traders are awaiting Thursday's US consumer inflation figures for guidance.

Therefore, the lower probability of aggressive Fed rate cuts and a resilient economy may limit the appeal of gold. The robust US Dollar and uncertainty regarding rate cuts could exert downward pressure on gold prices until clarity emerges from Thursday's consumer inflation data.

Geopolitical Tensions and China's Monetary Policy: Potential Impacts on Gold Prices

Furthermore, a senior US Defense Department official reported that Iran-backed Houthi militants executed their most substantial attack on commercial ships, as per CNBC on Tuesday. Meanwhile, a senior People’s Bank of China official mentioned today that China's central bank might use monetary tools to strongly support credit growth. The official emphasized bolstering counter-cyclical and cross-cycle policy adjustments to foster favorable conditions for economic growth. Notably, there's no significant US macro data on Wednesday, leaving the XAU/USD vulnerable to USD price movements.

Hence, the geopolitical tensions from the Houthi attack and China's commitment to support credit growth may create uncertainty, potentially boosting gold as a safe-haven asset.

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

GOLD (XAU/USD) - Technical Analysis

In the financial markets, Gold (XAU/USD) remains a barometer of investor sentiment and economic health. As of Wednesday, January 10, Gold is trading at approximately $2,029, showing minimal change with a slight decline of 0.01%. This stability in price reflects the market's current state of equilibrium and investor caution.

The technical analysis presents a clear picture of the key price levels for Gold. The pivot point is set at $1,996, suggesting that this level could be crucial in determining the short-term trend. Immediate resistance levels are identified at $2,020, $2,049, and $2,075. These points are significant as they could cap Gold’s potential upward movements. Conversely, immediate support levels at $1,966, $1,937, and $1,908 could provide a safety net against any substantial decline in price.

The Relative Strength Index (RSI) for Gold is at 42, indicating a bearish sentiment as it is below the neutral 50 mark. This suggests that the market is not overly bullish on Gold at the moment. The Moving Average Convergence Divergence (MACD) values, with the MACD line at 0.7 and the signal line at -5.0, imply a potential for upward momentum. The 50-Day Exponential Moving Average (EMA) for Gold stands at $2,031, and the current price below this mark suggests a short-term bearish trend.

Chart analysis reveals a symmetrical triangle pattern in Gold's price movement, indicating a period of consolidation and market indecision. This pattern typically reflects a balancing act between buyers and sellers, waiting for a catalyst to prompt a breakout.

In conclusion, while the overall trend for Gold appears to be neutral to bearish in the short term, the market is closely watching key technical levels for potential breakouts. The recommended trading strategy involves a sell entry below $2,031, targeting a take profit at $2,015, and setting a stop loss at $2,046. This approach is backed by the current technical indicators and chart patterns, suggesting a cautious approach in the short term with an eye towards potential shifts in market dynamics.

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