GOLD Price Analysis – March 05, 2024

Daily Price Outlook

Gold price (XAU/USD) extended its four-day upward rally and surged to an all-time high, above the $2,100 mark. However, the surge in gold prices was mainly driven by bets that the Federal Reserve (Fed) will start cutting interest rates in June, which undermined the US dollar and contributed to the gains in gold. Furthermore, previously released downbeat US economic data put further pressure on the US dollar, which is good for gold prices. In addition to this, the further escalation of geopolitical tensions in the Middle East was seen as another key factor that lent some support to safe-haven gold prices.

Potential Rate Cuts and Market Concerns Lead to US Dollar Depreciation and Gold Surge

On the US front, the broad-based US dollar failed to halt its declining rally and remained bearish due to Friday's disappointing US macro data, along with less hawkish comments by Federal Reserve officials. These factors bolstered bets for a June rate cut and pushed the gold price above the $2,110 mark. On the data front, recent data shows a faster-than-expected contraction in US manufacturing, with the ISM Manufacturing Index dropping to 47.8. Consumer sentiment, as measured by the University of Michigan, fell short of expectations. These indicators suggest ongoing challenges for economic growth.

Although, the losses in the US dollar could fade shortly as the escalation of geopolitical tensions in the Middle East could provide some support to the US dollar as a safe-haven asset. Moving on, traders seem cautious to place any strong position ahead of the week's important US macro releases, including the closely watched Nonfarm Payrolls (NFP). Moreover, investors are closely monitoring Fed Chair Jerome Powell's two-day testimony for additional insights into the direction of interest rates, as well as key US macroeconomic data, to gauge the next potential move for XAU/USD.

Geopolitical Tensions Boost Gold's Safe-Haven Appeal

On the geopolitical front, escalating tensions in the Middle East are boosting demand for safe-haven precious metals. Israeli forces fired on Palestinians awaiting aid in Gaza City. The UN is warning that without more funding, things could get much worse. Poor nutrition and not enough medical care have led to the deaths of 16 children in Gaza. A UN team found signs of sexual violence during an attack on Israel but is calling for a ceasefire. Since October 7, Israeli attacks on Gaza have hurt over 30,000 Palestinians, while Hamas attacks in Israel have killed 1,139 people.

GOLD (XAU/USD) - Technical Analysis

Gold's modest uptick on March 5th, trading at $2114.875, shows a tightrope walk between gains and resistance. The precious metal's performance, marked by a mere 0.04% increase, positions it within a battleground of technical indicators and key price levels, as per the observed trading patterns.

The pivot point at $2066 serves as a crucial juncture, below which the immediate support levels at $2043, $2001, and $1977 outline potential fallbacks. Conversely, resistance levels await at $2108, $2128, and $2169, hinting at barriers gold must overcome to sustain upward momentum. Such dynamics underscore the metal's sensitivity to market fluctuations and investor sentiment, reflected in the technical outlook.

The RSI, peaking at 82, signals an overbought condition, suggesting cautious optimism among traders. Meanwhile, the MACD's value at 4.9 against a signal of 20.479 possibly indicates a disparity between immediate price actions and longer-term market trends. The 50-day EMA at 2098 reinforces a bullish undertone, yet the strategy to sell below $2120 with a take-profit at $2100 and a stop loss at $2129 acknowledges the immediate pressure points and potential pullback zones.

In essence, gold's current market positioning underscores a nuanced balance between bullish prospects and the need for strategic caution, given the looming resistances and overbought signals. As the market awaits further cues, the overarching narrative is one of vigilance and measured optimism.