Technical Analysis

GOLD Price Analysis – June 18, 2024

By LonghornFX Technical Analysis
Jun 18, 20244 min

Daily Price Outlook

Gold price (XAU/USD) experienced some dip-buying during the European session on Tuesday, reversing part of the previous day's modest losses. The incoming US macroeconomic data indicated that inflationary pressures are subsiding, maintaining hopes for the first Federal Reserve (Fed) rate cut in September and providing some support to the non-yielding yellow metal.

However, Gold remains confined within a week-long range below the 50-day Simple Moving Average (SMA), signaling caution for bullish traders.

US Dollar and Treasury Yields Influence

Last week, the Fed adopted a more hawkish stance, with policymakers favoring only one interest rate cut this year. This hawkish outlook supports elevated US Treasury bond yields, reviving demand for the US Dollar (USD) and limiting significant appreciation in Gold prices.

Additionally, a generally positive risk sentiment might cap the demand for safe-haven assets like Gold. Strong follow-through buying is needed to confirm that the recent pullback from the all-time peak has concluded.

Impact of US Dollar Dip-Buying

On Tuesday, some US Dollar dip-buying emerged, acting as a headwind for Gold prices, though any meaningful slide remains elusive amid expectations of two Fed rate cuts in 2024.

The Fed's projection of a single interest rate cut this year, compared to three in March, helped US bond yields recover part of last week's losses and allowed the USD to regain positive traction.

Philadelphia Fed President Patrick Harker noted that maintaining rates longer will help reduce inflation, adding further pressure on the non-yielding yellow metal.

Key Economic Data and Fed Speeches

Data released on Friday showed that US import prices fell for the first time in five months in May, along with weaker US consumer and producer prices, indicating subsiding inflation. This keeps hopes alive for the first Fed rate cut in September, followed by another in December.

Investors are now focused on Tuesday's US economic docket, which includes Retail Sales and Industrial Production data, for short-term trading opportunities during the early North American session.

Additionally, speeches from influential Federal Open Market Committee (FOMC) members will play a crucial role in influencing USD demand, which, along with broader risk sentiment, should impact Gold prices.

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

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) is currently trading at $2,312.25, with bearish momentum observed on the 2-hour chart. The symmetrical triangle pattern forming suggests potential breakout volatility. The pivot point at $2,319.43 is crucial for determining the next move. Immediate resistance levels are seen at $2,325.03, $2,332.00, and $2,339.37. To confirm a bullish reversal, these resistance levels need to be breached. On the downside, immediate support is found at $2,309.55, with further support levels at $2,300.00 and $2,297.24. The Relative Strength Index (RSI) is at 40.71, indicating bearish sentiment but not yet in oversold territory.

The 50-day Exponential Moving Average (EMA) at $2,319.43 is currently acting as a resistance level. The price needs to break above this EMA to signal a potential shift to bullish momentum. The 200-day EMA at $2,331.28 also serves as a significant resistance point that the price needs to surpass to confirm a stronger bullish trend. The current price action suggests that a break above the immediate resistance could signal a bullish move, while a drop below the pivot point of $2,319.43 may lead to further downside pressure. Monitoring these key levels and EMA crossovers will be essential for short-term trading strategies.

The Fibonacci retracement levels further highlight key areas of interest. A break above the pivot point of $2,319.43 could indicate a bullish move, while a drop below $2,309.55 may suggest further downside pressure. Considering the current technical outlook, a sell position below $2,320 is advisable with a take profit target at $2,300 and a stop loss at $2,332.

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