Technical Analysis

GOLD Price Analysis – Jan 23, 2024

By LonghornFX Technical Analysis
Jan 23, 20244 min

Daily Price Outlook 

Gold price (XAU/USD) maintained its upwrd stance and remained well bid around above 2,030 level. However, the reason for its upward trend can be attributed to the geopolitical risks and china’s economic woes, which lend some support to the safe-haven XAU/USD. Investors are lowering their hopes for the Federal Reserve to aggressively cut interest rates, as recent signs suggest the economy is doing well.

The market now sees a 40% chance of a rate cut in March, down from 80% a week ago. Hence, the reduced expectations of aggressive rate cuts was seen as a key factor that kept the lid on any additional gains in the gold price.

Reduced Rate Cut Expectations Impact Gold Prices

Investors are adjusting their expectations for the Federal Reserve to reduce interest rates aggressively. This shift is driven by recent positive economic data and statements from Fed officials indicating continued economic strength. Strong US macro indicators are contributing to higher Treasury bond yields, which, in turn, are limiting gains in gold prices.

Traders are exercising caution ahead of key economic releases this week. Notably, the probability of a rate cut in March has decreased from 80% to 40%. The 10-year US bond yield is close to its December peak, supporting the US Dollar and restraining gold (XAU/USD).

Therefore, the reduced probability of aggressive interest rate cuts and higher US Treasury yields limit gold price gains. The resilient economy and strong dollar act as headwinds for gold (XAU/USD).

Geopolitical Tensions Drive Surge in Gold Prices

Moreover, ongoing concerns about increasing tensions in the Middle East and economic challenges in China are boosting the appeal of safe-haven assets, leading to a positive shift in gold prices on Tuesday. The US and UK recently conducted joint air strikes against Iran-backed Houthis in Yemen, with the aim of safeguarding ships in the Red Sea. Diplomacy is underway between Pakistan and Iran, but the Israel-Hamas conflict poses a risk of escalating into a larger-scale war, potentially having global economic repercussions. These geopolitical developments are influencing the upward movement in gold prices as investors seek refuge amid uncertainty.

Therefore, the rising Middle East tensions and economic challenges in China are driving investors to seek safety in Gold. Geopolitical events, like joint airstrikes and conflicts, contribute to a positive shift in Gold prices.

Meanwhile, the upcoming European Central Bank (ECB) policy decision on Thursday could add some excitement to the markets, offering short-term trading chances for gold. Moving on, the release of the Richmond Manufacturing Index along with US bond yields, USD price movements, and overall risk sentiment, could provide some market momentum.

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

GOLD (XAU/USD) - Technical Analysis

Gold's allure strengthens modestly in today's trading, with prices edging up 0.36% to $2028.31, reflecting a mild positive sentiment among investors. The precious metal finds itself navigating around a pivot point of $2,031, suggesting a pivotal moment for its immediate trajectory. Key resistance levels at $2,058, $2,088, and $2,116 form a series of challenges ahead, while support at $2,001 and lower at $1,973 and $1,945 offers a cushion should gold's ascent falter.

Technical indicators lend a nuanced view: the Relative Strength Index (RSI) at 53 hints at a balanced momentum, neither overbought nor oversold. The Moving Average Convergence Divergence (MACD) presents a positive crossover, with its value at 0.70600 above the signal at -1.152, typically a bullish sign. The 50-day EMA at $2,024.27 underscores this optimism, aligning closely with current levels.

From a chartist's perspective, no distinct pattern prevails, leaving the next movement somewhat ambiguous. However, the technicals lean towards a cautiously optimistic forecast, suggesting potential for an upward push. Traders might consider entry above $2023, targeting $2040, while maintaining a stop loss at $2010 to protect against any unexpected downturns.

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