GOLD Price Analysis – Jan 31, 2024
Daily Price Outlook
Gold price (XAU/USD) failed to extend its upward trend and dropped from a two-week high to the $2,030 level. However, the reason for its bearish bias can be attributed to renewed strength in the US dollar, which tends to undermine the gold price. However, the US dollar was mainly backed by the JOLTS report published on Tuesday, which suggests that the labor market is too strong for the Federal Reserve (Fed) to start cutting interest rates in the first quarter. This has helped revive demand for the US Dollar and pushed it back closer to its highest level . This was seen as a key factor exerting pressure on the precious metal gold.
Looking forward, the investor's focus is on the outcome of the awaited FOMC monetary policy meeting today, which will influence the next move for Gold prices. Despite a recent drop, concerns about geopolitical risks in the Middle East and China's economic challenges are expected to provide some support to the safe-haven XAU/USD.
Positive Economic Indicators and USD Strength: Impact on Gold Prices
It's important to note that the recent JOLTS report showed a robust labor market, making it less likely for the Federal Reserve (Fed) to cut interest rates in the first quarter. This increased demand for the US Dollar and exerting pressure on gold price. Notably, the Job Openings and Labor Turnover Survey revealed a surprising increase in US job openings to 9.02 million in December.
Furthermore, the Conference Board's US Consumer Confidence Index rose to 114.8 in January. The International Monetary Fund upgraded its forecast for US economic growth to 2.1% in 2024, indicating a healthy economy and reducing the likelihood of Fed rate cuts. This further supported the US Dollar and weighed on gold prices.
Hence, the positive economic indicators, including a strong labor market, increased consumer confidence, and an upgraded economic growth forecast, have bolstered the US Dollar and diminished the probability of Fed rate cuts, putting downward pressure on gold prices.
Geopolitical Concerns and Economic Data Impact on Gold Prices
Moreover, the ongoing concerns about geopolitical tensions in the Middle East and China's economic challenges were seen as key factors that could help limit losses in the safe-haven gold price. China's official Manufacturing PMI slightly improved to 49.2 in January but still indicates contraction for the fourth consecutive month, reflecting a sluggish domestic recovery and weak external demand.
On the positive side, the Non-Manufacturing PMI rose to 50.7 from 50.4 in January, offsetting some concerns. Investors are eagerly awaiting the FOMC policy decision for insights into potential interest rate cuts, which could strongly influence the direction of gold. Before the central bank update, traders will also be watching the ADP report on private-sector employment and the Chicago PMI.
Therefore, the concerns over geopolitical tensions and China's economic struggles could provide support to the safe-haven gold (XAU/USD), preventing a significant decline.
GOLD (XAU/USD) - Technical Analysis
Gold's position on January 31 reflects a market in balance, trading at $2033.85, a slight decrease of 0.15%. This subtle retreat comes despite the metal's sustained position above its pivot point at $2,023.
As investors parse through the day's developments, immediate resistance levels loom overhead at $2,036, $2,051, and a more distant hurdle at $2,063, posing potential challenges for upward price ambitions. On the downside, gold finds cushioning supports at $2,007, $1,994, and $1,978, which may arrest any bearish slide.
From a technical standpoint, the Relative Strength Index (RSI) at a neutral 55 suggests a market in balance, free of the extremes of overbuying or overselling. The MACD indicator offers a slight hint of momentum, with a current value of 0.62500 against a signal of 3.2890, although this does not provide a strong directional cue.
The 50-day Exponential Moving Average (EMA), closely aligned with the current price at $2034, corroborates the pivot point's significance in the current market structure.
The observed chart patterns contribute to the narrative, as a descending trendline introduces resistance around the $2048 mark, pressuring gold lower and opening up a window for a potential short position.
Given the technical elements at play, the immediate strategy leans towards a bearish slant, with an advised sell entry below $2037, targeting profits at $2026, and placing a stop loss at $2044 to mitigate risk.
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