GOLD Price Analysis – Jan 15, 2024
Daily Price Outlook
Gold price (XAU/USD) maintained its upward trend and remained well-bid around the $2,055 level. However, the reason for its upward trend could be attributed to the risk-off market sentiment, driven by the Red Sea situation. It should be noted that the Israel-Gaza conflict intensified after Houthi attacked a US Navy vessel, which boosted the safe-haven assets including gold price. Gold prices continue to rise for the third consecutive day on Monday, trading higher and reaching around $2,055 level.
Furthermore, the ongoing speculation regarding potential rate cuts by the Federal Reserve (Fed) in March was seen as another key factor that underpinning the gold price. Meanwhile, the bearish US dollar has also played a major role in supporting the gold price.
Escalating Tensions in the Middle East: Impact on Gold Prices and Financial Markets
It's important to note that the situation in the Israel-Gaza conflict has raised concerns, particularly with the recent missile attack by the Houthis, backed by Iran, on the USS Laboon in the Red Sea. This has heightened tension, leading people to consider Gold as a safe investment amidst the uncertainty.
Additionally, people are keeping an eye on the Strait of Hormuz for potential shipping problems. The main worry is the uncertainty in the region and how Iran responds. This is not only impacting the military situation but also making financial markets uneasy, leading to an increase in gold prices.
Therefore, the escalating Israel-Gaza tension, coupled with the Houthis' missile strike on the USS Laboon, has heightened concerns, prompting a shift to Gold as a safe-haven asset. The uncertainty is impacting Gold prices, indicating concern in financial markets.
Impact of Weakening US Dollar and Lower Treasury Yields on Gold Prices
Furthermore, the broad-based US Dollar is at about 102.40 and not looking too positive. This is mainly because US Treasury yields are dropping, likely due to softer Producer Price Index (PPI) data. The DXY, which measures the dollar against other currencies, lost some of its gains due to the decline in these yields. Currently, the 2-year and 10-year yields on US bonds are down to 4.14% and 3.94%, respectively.
In the meantime, Barclays changed its prediction for the first Federal Reserve rate cut, moving it up to March instead of June. This shift in expectations is pushing the Dollar down as people anticipate a more relaxed monetary policy from the Fed.
Therefore, the news of declining US Dollar and lower Treasury yields, along with Barclays' forecast of an earlier Fed rate cut, is boosting Gold prices. Investors turn to Gold amid expectations of a softer monetary policy and economic uncertainty.
GOLD (XAU/USD) - Technical Analysis
In the realm of precious metals, gold presents an intriguing technical picture as it begins the week with slight bearish undercurrents. Trading at $2,047, the metal is down by a marginal 0.06%, indicating a pause in bullish momentum yet holding firmly above the $2,000 psychological mark. The monthly chart time frame provides a broader perspective on gold's consolidation phase within a symmetrical triangle pattern, hinting at an impending volatility breakout.
Gold's pivot point stands at $2,021, serving as the immediate fulcrum for price swings. The metal faces successive resistance levels at $2,041, closely aligned with the 50-day EMA, followed by $2,070, and a stronger barrier at $2,091. Support levels are equally established, with the nearest at $1,992, then $1,973, and $1,952, which could offer buying opportunities on dips.
The RSI maintains a reading of 56, suggesting a neutral to slightly bullish sentiment. The MACD indicator is poised at 2.985, slightly above its signal line at 2.683, subtly indicating the potential for upward price action as the market digests and reacts to macroeconomic factors.
The symmetrical triangle pattern observed on the chart is typically indicative of a market in equilibrium, with the asset's path of least resistance becoming clearer upon a decisive breakout. The convergence of the pattern near key moving averages adds to the potential for a significant move.
Concluding, the overall trend for gold maintains a neutral stance with bullish undertones, as technical
indicators and chart patterns suggest a balance between supply and demand. Given the metal's positioning just above the 50-day EMA and the MACD's slight bullish bias, the short-term forecast anticipates a testing of resistance levels, particularly the immediate target at $2,070. Investors may consider a cautious entry with a buy limit order at $2,045, targeting profits at $2,070, and placing a stop loss at $2,030 to manage risks.
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