Technical Analysis

GOLD Price Analysis – July 08, 2024

By LonghornFX Technical Analysis
Jul 8, 20244 min

Daily Price Outlook

Gold (XAU/USD) continued its downward trend, remaining under pressure around $1800 and dipping to an intraday low of $1795. This decline can be attributed to several factors. Firstly, the US dollar strengthened, despite growing expectations of a Federal Reserve rate cut in September, exerting bearish pressure on gold.

Moreover, losses in the gold price were exacerbated by reports that China's Central Bank ceased gold purchases for the second consecutive month in June.

Looking ahead, traders are closely monitoring Federal Reserve Chair Jerome Powell's upcoming testimony on Tuesday. Following that, the market will focus on the release of US June Consumer Price Index (CPI) inflation data on Thursday, which is expected to provide further direction to the markets.

Impact of China's Central Bank Gold Reserves Stability on Gold Prices

On the other side, official data released on Sunday revealed that China's central bank, the People's Bank of China (PBoC), did not add any gold to its reserves for the second straight month in June, as reported by Bloomberg.

China's gold reserves remained unchanged at 72.80 million troy ounces at the end of June, the same as the previous month. The value of these reserves decreased slightly from $170.96 billion to $169.70 billion during the same period, according to the official data.

Therefore, the lack of gold purchases by China's central bank for the second consecutive month in June kept its reserves stable at 72.80 million ounces. This contributed to slight downward pressure on gold prices, reflecting reduced demand from a major buyer.

Impact of US Economic Data and Fed Rate Cut Speculation on Gold Prices

On the US front, the broad-based US dollar faced challenges in sustaining its upward momentum but held onto gains, despite growing speculation about potential interest rate cuts by the Federal Reserve in the third quarter.

This speculation could potentially soften losses for gold. Recent employment data have reinforced expectations of a rate cut in September, with market probabilities now indicating a 77% likelihood, up from 70% before the latest report.

On the data front, US Nonfarm Payrolls (NFP) increased by 206,000 jobs in June, surpassing the expected 190,000 and following a revised 218,000 rise in May (originally reported as 272,000).

Meanwhile, the Unemployment Rate rose slightly to 4.1% from May's 4%, while Average Hourly Earnings, a gauge of wage growth, declined to 3.9% year-over-year in June from 4.1% in May, meeting market forecasts.

Therefore, the stronger-than-expected US employment data, coupled with speculation of reduced Federal Reserve rate cuts, may bolster the US dollar and pressure gold prices downward amid reduced safe-haven demand.

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

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) is currently trading at $2,377.855, reflecting a decline of 0.36%. The 4-hour chart reveals critical technical levels and indicators that traders should closely monitor. The pivot point is set at $2,365.00, marking a significant threshold for potential bullish or bearish movements.

Immediate resistance levels are identified at $2,393.47, $2,402.26, and $2,409.80. A break above these levels could signal further upward momentum for gold. Conversely, support levels are located at $2,365.41, $2,357.04, and $2,349.09. A drop below these support points could trigger a significant selling trend.

The Relative Strength Index (RSI) stands at 58, suggesting that gold is currently in a neutral zone. Typically, an RSI level below 70 indicates there is still room for upward movement before the asset becomes overbought.

The 50-day Exponential Moving Average (EMA) is positioned at $2,355.64, reinforcing the bullish trend as long as the price remains above this average. The EMA acts as dynamic support, and maintaining a price above this level supports the ongoing bullish sentiment.

Given the current market conditions, a prudent strategy would be to enter a sell position below $2,381. Setting a take-profit target at $2,365 aligns with immediate support levels, providing a favorable risk-reward ratio while capturing potential gains. A stop-loss at $2,393, just above the nearest resistance point, helps limit downside risk from unexpected market movements.

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