Technical Analysis

GOLD Price Analysis – Jan 19, 2024

By LonghornFX Technical Analysis
Jan 19, 20243 min

Daily Price Outlook 

Gold prices (XAU/USD) failed to maintain their upward trend and lost some ground around the 2,022 level. The downward trend can be attributed to reduced bets for a March Fed rate cut, leading to upward pressure on US bond yields and the US dollar, contributing to gold losses. Meanwhile, geopolitical tensions in the Middle East escalated further after Pakistan launched retaliatory airstrikes inside Iran on Thursday. This adds to US-Houthi clashes in the Red Sea. In the meantime, the ongoing worries about economic weakness in China were seen as one of the key factors helping gold prices limit their deeper losses.

Stable USD and Diminished Rate Cut Expectations Impact Gold Prices

It's worth noting that the US Dollar (USD) has been trading steadily for three days, supporting the price of Gold. However, expectations of a Federal Reserve (Fed) interest rate cut have diminished, keeping US Treasury bond yields up and the USD stable. This could limit Gold's potential gains. Another factor that has been bossting the US dollar was positive economic data, such as strong Retail Sales and a drop in Jobless Claims. This prompts markets to scale back expectations of a March rate cut, strengthening the USD further. The higher 10-year US bond yield favors the USD but may hinder significant Gold price increases.

Therefore, the reduced probability of a Fed rate cut and positive US economic data has stabilized the USD, limiting Gold's upward potential.

Geopolitical Unrest Fuels Gold's Safe-Haven Appeal

Furthermore, tensions persist as US-led forces clash with Iran-backed Houthi rebels in the Red Sea, impacting the safe-haven Gold price amid stable US Dollar trading. Houthi rebels recently targeted a US-owned tanker, prompting the fifth US strike against them. Simultaneously, Pakistan conducted military strikes on terrorist hideouts in Iran's Sistan-Baluchistan province. In response, Iran initiated an air defense drill near the Pakistan border.

These geopolitical developments contribute to Gold's appeal as a safe-haven asset, with ongoing conflicts and military actions influencing market sentiment and supporting Gold prices. Investors may turn to Gold amid uncertainty, affecting its value in response to global geopolitical tensions.

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

GOLD (XAU/USD) - Technical Analysis

As of January 19, 2024, the gold market presents a nuanced technical landscape. Currently trading at $2021, gold has witnessed a modest dip of 0.10% in the last 24 hours. Despite this slight downward movement, the broader picture offers a mixed bag of signals for traders and investors alike.

Key price levels are critical to understanding potential movements. The pivot point stands at $1,992, serving as a crucial psychological and technical marker. Immediate resistance levels are observed at $2,022, $2,041, and $2,070, each representing potential hurdles for upward momentum. Conversely, support levels are identified at $1,973, $1,953, and $1,931, which could provide stability or indicate further decline if breached.

The technical indicators offer additional insight. The Relative Strength Index (RSI) is currently at 46, hovering near the midpoint of the 30-70 range, suggesting a lack of clear overbought or oversold conditions. The Moving Average Convergence Divergence (MACD) presents a more complex picture. The MACD value is at 0.80, with the signal at -5.481. This disparity could indicate a potential shift in momentum, though it warrants cautious interpretation.

The 50-Day Exponential Moving Average (EMA) stands at $2,018, closely aligning with the current trading price, further complicating the short-term outlook.

A key observation is the symmetrical triangle pattern, which was previously breached and is now acting as resistance at $2025. This pattern, along with candlestick analysis, suggests a potential pivot in the market dynamics.

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