Technical Analysis

GOLD Price Analysis – Jan 12, 2024

By LonghornFX Technical Analysis
Jan 12, 20243 min

Daily Price Outlook

Gold price (XAU/USD) maintained its upward trend and remained well bid around the $2,035 level. However, the reason for its upward trend can be attributed to the weakened US dollar, influenced by concerns over a potential March Fed rate cut despite a slightly higher US CPI. Apart from this, the geopolitical risks, particularly the Israel-Hamas conflict, and ongoing economic uncertainties in China further bolster the appeal of the safe-haven XAU/USD.

Impact of US Inflation Data and Rate Hike Speculation on Gold Prices

Recent data has revealed a higher-than-expected increase in US consumer prices for December. This, along with comments from Federal Reserve officials suggesting a possibility of prolonged higher interest rates, has sparked market speculation. Surprisingly, despite expectations of a rate cut in March, there is growing support for Gold.

The mixed inflation figures, with the headline Consumer Price Index (CPI) rising to 3.4% YoY, have raised doubts about an imminent rate cut. Fed officials, including Loretta Mester and Tom Barkin, have expressed caution, emphasizing the need for convincing evidence of inflation reaching the target before considering rate adjustments. Despite these cautious sentiments, the market still assigns a 65% probability of a rate cut in March, favoring Gold as the US Dollar weakens due to lower government bond yields.

Impact of Geopolitical Tensions and Economic Concerns on XAU/USD

Furthermore, ongoing geopolitical tensions, such as the Israel-Hamas conflict and concerns about China's slow economic recovery, continue to favor the safe-haven XAU/USD (Gold/US Dollar). Recent US and UK military actions against Houthi targets in response to Red Sea attacks add to these concerns.

Meanwhile, the chinese inflation figures indicate deflationary risks, and a 0.3% dip in 2023 imports suggests sluggish domestic demand, raising worries about economic recovery. Traders are now eyeing the US Producer Price Index and a speech from Minneapolis Fed President Neel Kashkari for potential market direction.

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

GOLD (XAU/USD) - Technical Analysis

As we observe the precious metal market, Gold (XAU/USD) continues its streak of subtle yet notable movements. Trading at $2,034, it marks a slight increase of 0.30%. The pivot point at $2,021 remains a key focus for traders, with immediate resistance levels mapped at $2,051, $2,075, and $2,103. On the flip side, support levels are established at $1,995, $1,965, and $1,937, providing a cushion against potential downward trends.

The technical indicators offer a mixed sentiment. The Relative Strength Index (RSI) stands at 51, hovering around the midpoint, which indicates a balanced market condition with a slight lean towards bullish sentiment. The Moving Average Convergence Divergence (MACD) shows a value of $1.22 against a signal of -$2.53, suggesting a cautious yet potential upward momentum. Moreover, the 50-Day Exponential Moving Average (EMA) is set at $2,029, with the current price slightly above this mark, pointing towards a short-term bullish trend.

Chart patterns have shown that Gold recently violated a symmetrical triangle pattern, only to revert to trading within the vicinity of the $2,040 mark. This indicates a potential support level at $2,016, which traders should monitor closely.

In conclusion, the overall trend for Gold appears to be cautiously bullish, given its current trading above key technical levels. However, market volatility and external economic factors could sway its direction. Short-term traders might consider a sell limit at $2039, targeting a take profit at $2020, and setting a stop loss at $2053, keeping a close eye on fluctuating market conditions.

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