Technical Analysis

GOLD Price Analysis – March 01, 2024

By LonghornFX Technical Analysis
Mar 1, 20243 min

Daily Price Outlook

Despite the bearish US dollar, the gold price (XAU/USD) failed to gain much traction and consolidated below the one-month top of $2,040. The sluggish movement in the gold price was being driven by the risk-on market sentiment, which tends to undermine the safe-haven gold price. In contrast to this, the US dollar is losing its traction following the release of the US Personal Consumption Expenditures (PCE) Price Index, which opens the door for a potential interest rate cut by the Federal Reserve (Fed). This is negative for the dollar as it suggests potential interest rate cuts by the Federal Reserve and lends some support to the gold price.

Impact of Federal Reserve Policy and Inflation Data on Gold Price

On the US front, recent data shows that inflation in January was the lowest in three years, possibly leading to an eventual interest rate cut by the Federal Reserve. However, influential Fed members suggest they'll wait until June before cutting rates, which supports higher Treasury bond yields and limits the downside for the US dollar and gold prices. On the data front, the Core US PCE Price Index, excluding food and energy, rose slightly in January, but the yearly rate eased to 2.4%. Market bets still indicate a chance of an interest rate cut in June, backed by comments from Fed officials like Atlanta Fed President Raphael Bostic and New York Fed President John Williams, though others emphasize the strength of the US economy and see no urgent need for rate cuts.

Therefore, the possibility of an eventual interest rate cut by the Federal Reserve, along with lower inflation and supportive comments from some Fed officials, could be positive for the gold price.

Impact of Risk-On Market Sentiment on Gold Price amid Stock Market Surge

On the other hand, the risk-on market sentiment was seen as a key factor that kept the lid on any additional gains in the gold price. It should be noted that the S&P 500 and Nasdaq Composite surged to record highs in February as investors welcomed upbeat economic data and awaited further signs of easing inflation, bolstering confidence in the stock market. Therefore, the factors driving the S&P 500's surge, including upbeat economic data and easing inflation concerns, may reduce demand for gold as a safe-haven asset, potentially exerting downward pressure on its price.

Gold Price Chart - Source: Tradingview
Gold Price Chart - Source: Tradingview

GOLD (XAU/USD) - Technical Analysis

In today's analysis of GOLD's daily technical outlook on March 1st, the market showcases a resilience, with GOLD trading at $2046.40, marking a modest uptick of 0.10% over the last 24 hours. This observation is based on a 4-hour chart timeframe, offering insights into short-term price movements. Critical price levels have been identified to guide traders: the pivotal point is positioned at $2043.00, acting as a focal point for market direction. Immediate resistance barriers are noted at $2050.64, $2057.94, and $2065.44, while crucial support thresholds stand at $2036.85, $2028.10, and $2016.76, delineating potential areas of price reversal or continuation.

Examining technical indicators provides further context. The Relative Strength Index (RSI) at 63 suggests a balanced momentum in the market, not excessively overbought or oversold. Additionally, the 50-day Exponential Moving Average (EMA) at $2031.05 serves as a dynamic support level, reinforcing the bullish sentiment prevalent in the market.

Considering these factors collectively, the overall trend for GOLD appears bullish. Traders may find opportunities to enter long positions above the pivot point of $2043.00, anticipating further price appreciation. A prudent approach would involve setting a take-profit target at $2056 to capture potential gains, while simultaneously implementing a stop-loss order at $2035 to mitigate downside risk.



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