Daily Price Outlook
Gold price (XAU/USD) failed to extend its upward momentum and dipped to the lower end of the daily trading range during the European session. However, the reason can be linked to the fact that investor sentiment turned positive following Chinese officials' commitment to implementing additional policy support for the struggling real estate sector. This development was seen as a key factor undermining the safe-haven precious metal.
At the same time, the optimism regarding more stimulus measures from China is boosting investor confidence and poses a challenge to safe-haven gold. In contrast to this, the expectations that the Federal Reserve has ended its rate hikes are weakening the US Dollar, providing some support to gold price to limit it deeper losses.
Investors anticipate that the Federal Reserve is unlikely to raise interest rates and may consider lowering them from March 2024. This sentiment is causing the US Dollar to decline to its lowest level since August 31. Amid concerns about the global economy, people are turning to Gold as a potential investment.
Gold's Strength Amid Fed Expectations, Inflation Reports, and Dollar Weakness
Despite some mild losses, the gold continues to show strength as investors believe the Federal Reserve is unlikely to raise interest rates. However, the recent reports indicating a slowdown in inflation and a decrease in jobless claims, signaling a cooling job market, contribute to this sentiment. Investors are increasingly confident that the Fed will maintain rates at their December 2023 meeting and are even considering a potential 1% rate cut by the end of 2024.
As a result, the change in expectations has caused the 10-year US Treasury yield to decline, benefiting Gold. Meanwhile, the weakness of the US dollar is offering additional support to Gold as the market awaits the upcoming FOMC minutes on Tuesday.
Global Economic Concerns Amid Israel-Hamas Tensions and Chinese Market Moves
Furthermore, the concerns about the situation between Israel and Hamas are raising worries about potential impacts on the global economy, with fears of a recession if the situation escalates. Reports of rejected talks between Israel and the US with Hamas regarding a potential pause in the fighting in exchange for freeing hostages add to the uncertainty. These factors may help limit deeper losses for the safe-haven gold price.
Meanwhile, China's central bank maintaining low interest rates and injecting funds into the markets, coupled with promises to support the struggling real estate sector, are boosting investor confidence. These factors are influencing the safe-haven Gold price against the US Dollar.
GOLD (XAU/USD) - Technical Analysis
Gold's market posture remained unchanged at $1,981, demonstrating a pause after recent movements. On the chart, a pivot point is established at $2,005, serving as a fulcrum for potential swings in price. Resistance levels are charted at $2,030, $2,067, and $2,104, each signifying a potential ceiling that bulls might find challenging to breach. Conversely, supports firm up beneath at $1,970, followed by $1,942 and $1,907, levels where buyers might emerge to bolster the price.
The Relative Strength Index (RSI) holds steady at 60, reflecting a market that is neither overextended nor languishing – a balanced terrain where bullish sentiments have a slight edge. The MACD indicator presents a neutral stance, with its line at the threshold of 0 and a signal line at 6.83, hinting at a market in equilibrium awaiting a catalyst. Notably, the gold price floats above the 50 EMA of $1,968, suggesting a bullish trend that has yet to be confirmed by further price action.
The observed chart patterns hint at a consolidation phase, as gold prices hover in a range, suggesting an imminent breakout. The proximity to the 50 EMA and the RSI's position indicates that the path of least resistance may be upwards, provided support levels hold firm.
Gold currently showcases a cautiously bullish trend, especially with the price stationed above the $1,970 mark. The market's conviction will be tested in the near term as it approaches key resistances. A successful challenge of these levels could cement the bullish narrative, while a retreat below $1,970 may tilt the scales in favor of a bearish scenario.
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