Technical Analysis

GOLD Price Analysis – July 10, 2024

By LonghornFX Technical Analysis
Jul 10, 20243 min

Daily Price Outlook

Gold (XAU/USD) has maintained its upward trend and remained well-bid around the 2,373 level, hitting an intra-day high of 2,374. The reasons for this upward trend could be linked to several factors, including geopolitical tensions, inflationary pressures, and a general shift towards safe-haven assets.

Additionally, central banks around the world have been consistently increasing their gold reserves, indicating strong institutional confidence in its value. These combined factors have contributed to the steady upward trend in gold prices, reinforcing its status as a valuable asset in uncertain times.

Impact of Speculation on Early Rate Cuts by the Federal Reserve on Gold Prices and the USD

On the US front, the broad-based dollar is weakening amid growing speculation that the Federal Reserve could begin cutting rates as early as September. This has pressured the USD and supported gold prices.

Federal Reserve Chairman Jerome Powell recently addressed the Senate Banking Committee, where he hinted at the possibility of an interest rate cut but refrained from specifying a date. His remarks suggest a data-dependent approach, leaving the market hopeful for a rate cut in the near future.

Therefore, the weakening US dollar, fueled by speculation of early rate cuts from the Federal Reserve, has supported gold prices.

Impact of Central Bank Gold Purchases on Gold Price Momentum

On the other side, the upward rally in gold prices has been further strengthened by consistent purchases from major central banks, despite the People’s Bank of China (PBoC) pausing its buying in May and June.

The overall demand from other central banks has effectively offset China’s absence. For example, India’s central bank acquired more than nine tons of gold in June, while the National Bank of Poland and the Czech National Bank bolstered their reserves by four and two tons respectively.

This widespread activity among central banks highlights strong global demand for gold that extends well beyond China.

According to Bert Melek, Head of Commodity Strategy at TD Securities, the ongoing purchases by these institutions signal broad and robust official sector support for gold, implying a bullish outlook for the commodity.

Despite the recent reduction in purchases by the PBoC, the strong demand from other central banks has significantly contributed to the upward momentum in gold prices, with projections now targeting levels as high as $2,475.

Therefore, the continued purchases by major central banks, despite China's recent pause, indicate robust global demand for gold. This strong institutional support suggests a bullish outlook, potentially pushing prices toward $2,475.

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

GOLD (XAU/USD) - Technical Analysis

Gold prices have shown a modest uptick in the latest trading session, buoyed by a slight dip in the US dollar. The precious metal is currently trading at $2,368.020, reflecting a 0.14% increase.

The gold market has seen consolidation around the $2,366.521 level, which aligns closely with the 50-period Exponential Moving Average (EMA).

The Relative Strength Index (RSI) at 54 indicates a neutral stance, suggesting that gold is neither overbought nor oversold at current levels. This equilibrium in RSI often precedes a significant price move, making it crucial for traders to watch closely for any emerging trends.

The key pivot point at $2,366.521 serves as a critical support level, reinforcing the current trading range. Immediate resistance is pegged at $2,379.352, followed by subsequent resistance levels at $2,391.215 and $2,402.888.

On the downside, immediate support is identified at $2,363.530, with next support levels at $2,355.365 and $2,354.352. These levels will be pivotal in determining the short-term trajectory of gold prices.

Traders should consider entering a buy position above $2,363, with a target of taking profit at $2,380 and a stop loss set at $2,354.

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