GOLD Price Analysis – March 06, 2024

Daily Price Outlook

Gold price (XAU/USD) slowed its bullish rally but still remained well-bid above the $2,100 mark. However, the previously released weaker US economic data strengthened market expectations of an imminent interest rate cut by the Federal Reserve. Hence, this dovish stance undermined the US dollar and pushed the gold price to the all-time high. Apart from this, the ongoing geopolitical tensions and China's economic woes dampen market sentiment, leading to increased flows towards safe-haven assets like gold.

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

On the US front, the broad-based US dollar unable to stop its bearish trend and still flashing red in the wake of previously released downbeat data, which strengthen market expectations that the Federal Reserve will cut interest rates sooner. Hence, the weaker US dollar, driven by downbeat economic data and expectations of a Federal Reserve rate cut, has supported the gold price, as investors seek the safe-haven asset amid market uncertainties.

On the data front, the Institute for Supply Management (ISM) reported that economic activity in the services sector expanded for the 14th consecutive month in February, but at a slower pace due to a decline in employment. Additionally, data from the US Commerce Department's Census Bureau showed that total factory orders fell by 3.6% month-on-month (-2.0% year-on-year) in January, following a 0.3% decline in the previous month.

It should be noted that buyers are reducing their positions before Fed Chair Jerome Powell's congressional testimony, which will clarify the interest rate outlook and impact gold price. The CME Group's FedWatch tool suggests a 70% chance of rate cuts by June, keeping US dollar buyers cautious and supporting gold prices. Traders will also watch for the release of the US ADP report on private-sector employment and JOLTS Job Openings data on Wednesday, ahead of Friday's Nonfarm Payrolls report.

Geopolitical Tensions Boost Gold's Safe-Haven Appeal

On the geopolitical front, the ongoing tensions in the Middle East and China's economic challenges also weighed on investor sentiment, leading to increased demand for safe-haven assets like gold. According to the latest update, Israel blocked a food convoy to north Gaza, making it harder to prevent famine. In the meantime, the talks for a ceasefire continue, but the US believes hurdles can be overcome. In southern Lebanon, an Israeli airstrike killed a Hezbollah fighter, his wife, and his son. Since October 7, over 30,000 Palestinians have been killed and 72,000 wounded in Gaza, with 1,139 deaths in Israel from Hamas attacks.

GOLD (XAU/USD) - Technical Analysis

In the recent trading session on March 6, the price of Gold slightly dipped by 0.11%, settling at $2125.8. Despite the minor decrease, Gold's trading dynamics present a complex picture, with the precious metal hovering around significant technical levels that suggest a cautious yet potentially bullish outlook.

The pivot point stands at $2066, serving as a foundational benchmark for Gold's immediate trajectory. Resistance levels at $2106, $2129, and a more distant $2171 outline potential ceilings that Gold might encounter if it continues on an upward path. Conversely, support levels are established at $2042, $2002, and $1977, indicating critical junctures where buying interest might intensify, offering a safety net against further declines.

The Relative Strength Index (RSI) is at a high of 79, indicating that Gold might be entering overbought territory, which often precedes a pullback. Meanwhile, the Moving Average Convergence Divergence (MACD) presents a more nuanced view. With a MACD value of 1 and a signal line at 22.33600, the current positioning suggests that while there's potential upward momentum, caution is warranted due to the possibility of a trend reversal. The 50-day Exponential Moving Average (EMA) at 2014 further underscores a bullish sentiment in the medium term, affirming Gold's resilience above this level.

Considering these factors, the technical outlook suggests a cautious but bullish bias for Gold. However, traders are advised to consider selling below $2030, with a take-profit target at $2116 and a stop-loss order at $2139, to manage risk effectively in light of potential volatility.

Gold's minor setback at $2125.8 hints at a cautiously bullish market posture.

Key technical indicators, including a high RSI and MACD analysis, suggest mixed signals, necessitating vigilance.

Advised trading strategy: Sell below $2030, targeting profits at $2116, safeguarded by a stop-loss at $2139.