Technical Analysis

GOLD Price Analysis – March 08, 2023

By LonghornFX Technical Analysis
Mar 8, 20233 min

Daily Price Outlook

The price of gold (XAU/USD) has been continuously dropping with no signs of an impending reversal. It is currently trading around the $1,812 level, indicating that sellers are willing to part with gold at that price.

This decrease in gold prices is attributed to the recent remarks made by Federal Reserve Chair Jerome Powell, which were deemed "hawkish." This suggests a more aggressive approach to monetary policy in order to combat inflation.

As a result, investors have redirected their attention to other investments such as stocks, which offer potentially higher returns. Additionally, the bullish bias of the US dollar, fueled by the Fed's hawkish stance, is also seen as a major factor that is exerting further downward pressure on gold prices.

Typically, gold and the US dollar have a negative correlation, meaning that when the value of the US dollar increases, the price of gold tends to decrease, and vice versa.

US Dollar Jumps on Powell's Remarks

On Wednesday, the US dollar gained significant support and reached a three-month high against a range of currencies. This was due to the surge in Treasury yields following Federal Reserve Chair Jerome Powell's suggestion that interest rates are likely to climb faster than what the market had forecasted.

Powell stated that the recent release of strong economic statistics would likely result in higher interest rates than previously anticipated to combat inflation.

Investors perceived this as a more aggressive monetary policy approach, leading to speculations of a 50 basis point interest rate hike in March instead of the previously predicted 25 basis point increase. CME Group's interest-rate futures show the market-implied probability of a 50 bps raise at the FOMC meeting in March increased from around 30% to 50%.

Therefore, the increase in the value of the US dollar had a significant adverse effect on the price of gold. This is due to the negative correlation between gold and the US dollar, which means that when the value of the US dollar rises, the price of gold tends to fall, and vice versa.

 Gold Price Chart - Source: Tradingview

Gold (XAU/USD) Intraday Technical Levels

Support      Resistance

1825            1846

1813            1856

1803            1868

Pivot Point: 1835

Gold (XAU/USD) – Technical Outlook

Yesterday, the price of gold experienced a significant decline, breaking below the key level of $1828.70 and closing the daily candlestick below it. This has once again put the price under bearish pressure, with a potential target of $1788.20.

The bearish channel is guiding this downward trend, and the EMA50 is providing additional downward pressure on the price.

Although the Stochastic indicator is currently showing some positive momentum, it is not expected to significantly slow down the bearish wave. Unless the price can rally to break above $1828.70, followed by $1848.00 and maintain levels above them, the bias for today remains bearish. For today's trading, the expected range is between support at $1790.00 and resistance at $1825.00.



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