GOLD Price Analysis – March 04, 2024

Daily Price Outlook

Despite the mixed performance of US dollar, the gold price (XAU/USD) failed to stop its subdued movement and remained well-offered around $2,080. However, the sluggish movement in the gold price is driven by the risk-on market sentiment, which tends to undermine the safe-haven gold price. On the flip side, the US dollar is losing its traction following the release of Friday's disappointing US macro data and less hawkish remarks by Federal Reserve officials. This was seen as a key factor that could cap further losses in the gold price.

Impact of U.S. Macroeconomic Data and Federal Reserve Comments on Gold Price and U.S. Dollar

On the US front, the US Dollar is struggling due to disappointing macro data released on Friday. Meanwhile, Federal Reserve officials' less hawkish comments are also weighing on the currency, boosting the price of Gold. On the data front, the latest ISM survey indicates a faster contraction in US manufacturing activity in February than expected. In the meantime, the employment in the sector dropped to a seven-month low. Whereas, the ISM Manufacturing Index fell to 47.8 from January's 49.1, with the New Orders Index declining to 49.2. Moreover, the Prices Paid Index dipped to 52.5 from 52.9. The University of Michigan's Consumer Sentiment Index also fell short, dropping to 76.9 in February.

Furthermore, Chicago Federal Reserve President Austan Goolsbee indicate concerns about tight monetary policy, while Dallas Fed President Lorie Logan suggested slowing down the shrinking of the balance sheet. Fed Governor Adriana Kugler expects progress in combating disinflation, and Richmond Fed President Thomas Barkin anticipates a decrease in overall inflation in the coming months. Additionally, Fed Governor Christopher Waller expressed interest in increasing the central bank's holdings of short-term Treasuries, which could push down US Treasury bond yields.

Therefore, the struggling US Dollar and less hawkish Fed remarks are lifting Gold prices. Meanwhile, the disappointing US macro data, particularly in manufacturing and sentiment, further boosts Gold's appeal amid economic uncertainty.

Impact of Risk-On Market Sentiment on Gold Price and U.S. Stock Index Futures

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. U.S. stock index futures remained relatively unchanged on Monday, signaling a potential slowdown in the record-breaking rally as investors await updates on monetary policy and the Presidential Election. However, the S&P 500 Futures edged down 0.1% to 5,141.75 points, while Nasdaq 100 Futures stabilized at 18,340.50 points, and Dow Jones Futures dipped 0.1% to 39,098.0 points but still flashing green, which indicate risk-on mood in the market possibly due to AI-led tech stock gains and expectations of early interest rate cuts.

Therefore, the risk-on market sentiment, coupled with expectations of early interest rate cuts and AI-led tech stock gains, limited additional gains in the gold price amidst relatively stable U.S. stock index futures.

GOLD (XAU/USD) - Technical Analysis

The current technical outlook for gold (XAU/USD) on March 4th reveals a slight downtrend, with the price at $2081.125, marking a 0.10% decrease. The commodity is navigating a cautious path below its pivot point of $2086.70, indicating potential resistance ahead. The key resistance levels to watch are at $2098.43, $2108.83, and $2117.94, which if breached, could signal a bullish reversal. Conversely, immediate support is found at $2073.10, with further cushions at $2064.30 and $2050.70, suggesting areas where declines might find a floor.

Technical indicators provide a more nuanced view. The Relative Strength Index (RSI) stands at 77, hinting at overbought conditions that could precipitate a pullback. The formation of an inverted hammer pattern on the 4-hour timeframe reinforces this bearish outlook, suggesting potential for a correction. Moreover, the 50-Day Exponential Moving Average (EMA) at $2040.07 offers underlying support, highlighting a significant gap between current prices and the medium-term trend line.

Given these observations, the strategy leans towards a bearish bias with a recommended entry price for selling below $2085. Targets for taking profit and stopping losses are set at $2069 and $2098, respectively. This approach underscores a cautious stance in the short term, advising traders to watch for potential shifts around pivotal levels that could dictate the next phase in gold's price trajectory.