Technical Analysis

GOLD Price Analysis – Jan 17, 2024

By LonghornFX Technical Analysis
Jan 17, 20243 min

Daily Price Outlook 

Gold prices (XAU/USD) failed to halt their downward rally and remained well offered around the 2,019 level. The reason for this downward trend can be attributed to the bullish US dollar, backed by higher US Treasury bond yields. It should be noted that Federal Reserve (Fed) Christopher Waller's remarks on Tuesday forced investors to scale back their expectations for an early interest rate cut by the US central bank. This pushed the US Treasury bond yields higher, lifting the US Dollar (USD) to over a one-month peak.

Fed Comments and Rising Bond Yields Put Pressure on Gold Prices, Eyes on Future Economic Data

It's worth noting that investors are exercising caution due to reduced expectations of a Federal Reserve rate cut in March, combined with global tensions and sluggish economic growth in China. This cautious sentiment is creating a generally subdued atmosphere in the stock markets. Surprisingly, it's not boosting the demand for the safe-haven Gold.

Federal Reserve Governor Christopher Waller made comments on Tuesday that added to the skepticism about a March rate cut. He emphasized the need for the Fed to be careful and not rush into rate cuts, highlighting that the economy is performing well. This push up the yields on the 10-year US government bonds, crossing the 4.0% mark. This rise in bond yields is supporting the US Dollar and putting a cap on Gold prices.

Looking ahead, speeches by Fed Governors Michael Barr and Michelle Bowman could impact the US Dollar and provide some momentum for Gold. Traders are now keeping an eye on upcoming US economic data, expecting to see a 0.4% growth in monthly Retail Sales for December and flat Industrial Production.

Gold Price Faces Limited Relief Amid Middle East Tensions and Positive Chinese Economic Data

Despite ongoing tensions in the Middle East, safe-haven Gold (XAU/USD) isn't finding much support, and bullish traders remain subdued. A recent US airstrike targeting a Houthi missile site in Yemen due to a threat to ships adds to the geopolitical complexities. On the economic front, China reported a 5.2% annual growth in its economy for Q4 2023, meeting expectations. In December, Retail Sales saw a YoY rise of 7.4%, while Industrial Production experienced a YoY increase of 6.8%.

Despite facing external challenges and dealing with low consumer prices due to weak domestic demand, the presence of geopolitical risks and China's economic hurdles might moderate aggressive bearish bets on Gold, thereby aiding in limiting potential losses.

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

GOLD (XAU/USD) - Technical Analysis

Gold's current trading price of $2,018.60, down by 0.47%, reflects a cautious market sentiment. Analyzing the 4-hour chart timeframe, we observe several key levels that could dictate the metal's short-term trajectory. The pivot point is set at $1,993, suggesting a neutral to bearish outlook unless this level is decisively breached. Resistance levels are established at $2,021, $2,041, and $2,070, which could cap upward movements. Conversely, support levels at $1,972, $1,951, and $1,930 might offer a cushion against further declines.

From a technical standpoint, the RSI at 34 hints at a potential oversold scenario, possibly leading to a rebound. However, the MACD, currently at -3.64 with the MACD line below the signal line, suggests that the bearish momentum is still in play. The 50-Day EMA stands at $2,040, reinforcing the resistance zone. Notably, a symmetrical triangle pattern is observed, with a breakout at the $2,020 level, indicating a critical juncture for future price action.

The overall trend for Gold appears bearish, with a short-term forecast suggesting a potential test of lower support levels. Traders might consider a sell limit at 2023, with a take profit target at 2004 and a stop loss at 2034.

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