Technical Analysis

GOLD Price Analysis – June 10, 2024

By LonghornFX Technical Analysis
Jun 10, 20244 min

Daily Price Outlook

Despite the bullish US dollar, the precious metal gold has maintained its upward momentum, edging higher to around the $2,295 level and hitting an intra-day high of $2,300.

However, this upward trend can be attributed to the risk-off market sentiment, which has boosted demand for safe-haven assets like gold amid geopolitical tensions and uncertainty in financial markets.

Furthermore, the stronger US non-farm payrolls (NFP) report suggests that the Fed might delay starting its rate-cutting cycle. This keeps US Treasury bond yields higher and lifts the US dollar to a nearly one-month high, which, in turn, is seen as limiting gains in the gold price.

Moving ahead, traders seems cautious to place any strong bets ahead of the release of US consumer inflation data and the outcome of the two-day FOMC policy meeting.

Escalating Israel-Hamas Conflict and Gold Price Dynamics

In the ongoing conflict between Israel and Hamas, tensions have escalated with accusations of war crimes and significant casualties reported in the Gaza Strip. Hamas has accused Israel of committing a serious war crime in its attack on the Nuseirat refugee camp, resulting in the deaths of several individuals, including a US citizen. However, Israel denies these claims.

Meanwhile, the death toll in Gaza has risen to 274, including 64 children, with over 700 Palestinians injured. Additionally, Israeli war cabinet minister Benny Gantz has resigned, blaming Prime Minister Netanyahu for perceived failures in the Gaza war and calling for early elections.

The conflict has seen a significant loss of life and ongoing turmoil, with casualties and no immediate resolution in sight.

Therefore, the escalation of tensions between Israel and Hamas, coupled with accusations of war crimes and significant casualties, heightened geopolitical uncertainty. Investors may flock to safe-haven assets like gold, driving its price higher.

Impact of Positive US Job Data on Gold Prices

On the US front, the broad-based US dollar gained traction thanks to positive job data, putting downward pressure on gold prices.

The Nonfarm Payrolls report for May surpassed expectations, leading investors to revise their forecasts for a Federal Reserve interest rate cut in September. This has kept Treasury bond yields elevated and pushed the US Dollar to its highest level in nearly a month.

As a result, the likelihood of a September rate cut fell from 70% to around 50%, with markets now anticipating only one 25-basis-point reduction later in the year, possibly in November or December.

On the data front, the headline Nonfarm Payrolls (NFP) report showed that the US economy added 272,000 jobs in May, surpassing the expected 185,000 and the previous month's revised 175,000. This strong job growth overshadowed a rise in the unemployment rate to 4.0%.

Furthermore, Average Hourly Earnings increased by 4.1% over the past year, exceeding expectations. This wage growth could push prices higher and might require the Federal Reserve to keep interest rates elevated for a longer period.

Therefore, the stronger US dollar and positive job data exerted downward pressure on gold prices as investors revised expectations for a Federal Reserve interest rate cut, reducing the likelihood of September easing and delaying future cuts, impacting gold prices negatively.

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

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) is currently trading at $2,292.09, marking a slight decline of 0.02% on the day. On the 4-hour chart, gold is navigating a narrow range, reflecting cautious market sentiment amid broader economic uncertainties.

The pivot point, situated at $2,305.19, serves as a critical juncture for the day’s trading activities. Immediate resistance is identified at $2,327.58, followed by $2,354.43 and $2,387.56. These levels represent potential barriers that could cap any short-term rallies.

On the downside, immediate support lies at $2,277.44, with further support levels at $2,255.06 and $2,235.81. The technical indicators present a mixed outlook. The Relative Strength Index (RSI) stands at 31, indicating that gold is approaching oversold territory.

This could potentially signal a buying opportunity if the broader market conditions align. However, the 50-day Exponential Moving Average (EMA) at $2,340.10 suggests that there is significant resistance ahead, making upward movements challenging.

Given these conditions, the recommended strategy for traders is to set a sell limit at $2,305, with a take profit target at $2,255 and a stop loss at $2,330. This setup leverages the pivot point and immediate resistance level to manage potential risk and reward effectively.

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