Technical Analysis

GOLD Price Analysis – March 18, 2024

By LonghornFX Technical Analysis
Mar 18, 20244 min

Daily Price Outlook

Gold price (XAU/USD) failed to stop its previous three-day bearish rally and remained well offered around the 2,147 level. However, the downward trend can be associated with increasing expectations that the Fed will keep interest rates higher for longer, which continues to underpin the US dollar and contributes to gold losses. It is worth recalling that previously released stronger inflation data fueled speculation that the Federal Reserve would keep interest rates high for a longer time. In contrast, geopolitical tensions such as the Russia-Ukraine war and conflicts in the Middle East can support gold prices amid ongoing losses by increasing demand for the precious metal as a safe-haven asset.

Impact of US Economic Indicators on Gold and the Dollar

As we mentioned above that the previously released stronger inflation data reinforced hawkish outlook, suggesting an increase in interest rates to control inflation. Hence, the stronger inflation data and the possibility of the Federal Reserve maintaining higher interest rates underpinned the US dollar and had a negative impact on the gold price. Despite some stability in inflation expectations, the University of Michigan's survey showed a slight decrease in consumer sentiment.

Besides this, the CME Group's FedWatch Tool suggests a 60% chance of an interest rate cut in June, which dampens the US dollar as lower interest rates typically weaken a currency by making it less attractive to investors seeking higher yields. This could provide some support to the gold price due to its inverse relationship with the dollar.

Geopolitical Conflicts and Their Impact on Gold Prices

On the geopolitical front, the ongoing conflicts such as the Russia-Ukraine war and Middle East disputes are impacting gold prices. These uncertainties lead investors to choose safe-haven assets like gold, increasing its demand and price. Additionally, geopolitical tensions can affect other markets, causing investors to move investments to gold, further raising its price.

However, Ukraine's strikes on Russian oil refineries and Israel's actions in Gaza impacts commodity supply, raising prices and inflation concerns. This can increase demand for gold as a hedge against these risks, ultimately driving up gold prices.

GOLD Price Chart - Source: Tradingview
GOLD Price Chart - Source: Tradingview

GOLD (XAU/USD) - Technical Analysis

On March 18, Gold (XAU/USD) witnessed a slight decline of 0.38%, with the price settling at $2146.975. This movement occurred within a context where the precious metal's price dynamics have been keenly observed by traders seeking to navigate its short-term volatility against a backdrop of broader economic signals.

The technical landscape for gold reveals a nuanced picture. The pivot point stands at $2135, with immediate resistance levels identified at $2167, followed by $2176 and $2187. Conversely, the metal finds support at $2140, with subsequent levels at $2130 and $2119. This configuration suggests a battleground where $2150 emerges as a critical juncture; moving below this level might signal a bearish turn, while holding above it could indicate sustained bullish momentum.

Technical indicators add layers to this analysis. The Relative Strength Index (RSI) at 35 hints at a market that is edging towards being oversold, potentially setting the stage for a rebound. However, the presence of a bearish engulfing candle on the daily timeframe complicates this scenario, introducing the possibility of a downward correction. Meanwhile, the 50-Day Exponential Moving Average (EMA) at $2163, in conjunction with an upward channel on the 4-hour timeframe, generally supports a buying trend.

In conclusion, while the immediate trend for gold seems to favor buyers, especially within the upward channel, the recent bearish patterns observed warrant caution. Traders might consider a strategy of selling below $2150, with a take profit at $2135 and a stop loss also at $2135, carefully navigating the potential for a downward correction while remaining alert to the metal's broader bullish underpinnings.

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