Technical Analysis

GOLD Price Analysis – Jan 25, 2024

By LonghornFX Technical Analysis
Jan 25, 20243 min

Daily Price Outlook 

Gold price (XAU/USD) extended its winning streak and gained further momentum around the $2,015 level. The bullish bias can be attributed to ongoing geopolitical tensions arising from conflicts in the Middle East, providing support to the safe-haven gold price. In addition, the US Dollar (USD) failed to extend its overnight bounce and continues to stay below its highest level since December 13, which was reached on Tuesday. Therefore, the sluggish US dollar is considered another key factor contributing to the higher gold price.

Positive US PMI Data Dampens Gold Appeal Amid Reduced Fed Rate Cut Expectations

It is important to highlight that the recent positive release of the flash US PMI suggests a strong economy, causing investors to reconsider the possibility of an early interest rate cut by the Federal Reserve. This has resulted in higher US Treasury bond yields, making gold less attractive. The upbeat data, including a 15-month high in Manufacturing PMI and a resilient services sector, indicates a robust US economy, reducing expectations of aggressive Fed policy easing in 2024.

Therefore, the strong US economic data, featuring higher PMI and reduced expectations of a Fed rate cut, has pushed up Treasury yields, dampening gold's appeal as a non-yielding asset.

Geopolitical Tensions in the Middle East Boost Gold's Safe-Haven Appeal

Moreover, Gold prices are rising due to tensions in the Middle East. Recently, Iran-backed Houthi rebels targeted two US-owned ships near the Gulf of Aden. In response, the US military conducted pre-emptive strikes, citing a threat to shipping lanes in the Red Sea. This has increased gold's appeal as a safe-haven asset, as investors turn to it for security amid uncertainties. The ongoing conflict in the region is adding to concerns and pushing up gold prices.

Therefore, the geopolitical tensions in the Middle East, especially the Houthi attacks and the US military response, heighten gold's appeal as a safe-haven asset. This uncertainty drives up demand, leading to a rise in gold prices.

Market Caution Ahead of ECB Meeting and US Economic Reports

Looking forward, the upcoming European Central Bank meeting and the Advance US Q4 GDP report will be in spotlight. Besides this, attention is also on the US Personal Consumption Expenditures Price Index, Durable Goods Orders, and Weekly Initial Jobless Claims, which could influence the US Dollar and gold prices.

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

GOLD (XAU/USD) - Technical Analysis

Gold maintains a subtle ascent, now at $2,015.81, up by a marginal 0.07% for the day. The precious metal's pivot point stands at $2,002, a pivotal green line on the chart suggesting a balanced technical fulcrum.

Resistance levels are mapped out above this line, with the first at $2,029, the second at $2,058, and a third at a more distant $2,087. Support, conversely, is established at $1,973, with additional levels at $1,944 and $1,917.

The Relative Strength Index (RSI) is currently at 41, hinting at neither overbought nor oversold conditions. The Moving Average Convergence Divergence (MACD) shows a value of -1.163 with the signal at -1.978, indicating potential downward momentum as the MACD line remains below the signal line.

The 50-Day Exponential Moving Average (EMA) is calculated at $2,021.15, providing a dynamic level that could act as resistance in the near term.

In conclusion, with gold trading just below the 50 EMA and indicators suggesting a negative tilt, the trend is cautiously bearish. Traders might consider a sell position below $2,019, with a take profit at $2,006, and a stop loss set at $2,030 to manage risk.

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