Technical Analysis

GOLD Price Analysis – Nov 21, 2023

By LonghornFX Technical Analysis
Nov 21, 20234 min

Daily Price Outlook

Gold prices (XAU/USD) maintained their upward momentum and regained strong positive traction on Tuesday, hovering near a two-week high. However, this surge in value can be attributed to the bearish performance of the US Dollar, which continues losing ground in the wake of dovish expectations from the Federal Reserve.

In the meantime, the previously released downbeat US macroeconomic data has erased any remaining expectations of additional rate hikes and fueling speculation about a potential series of rate cuts in 2024. This was seen as one of the key factors that led to a decline in US Treasury bond yields and contributed to the gains in the gold price.

Although, the recent upward trajectory in gold prices could be temporary as the ongoing risk-on sentiment in the market is dampening demand for the traditional safe-haven asset, gold. Notably, investors are upbeat about potential stimulus measures from China aimed at strengthening the post-pandemic recovery. Meanwhile, trader seem hesitant to place any strong position as the current attention is now turning to the upcoming release of the FOMC meeting minutes later in the US session.

Gold Price Dynamics Amidst Shifting Federal Reserve Expectations

It is worth noting that the broad-based US Dollar is consistently losing value due to expectations of a dovish stance by Federal Reserve, which is boosting the Gold price. Investors think the Fed has ended increasing interest rates and are now keeping an eye out for when they might start lowering them. Notably, the 2-year US government bond yield is lower than the current Fed target, hinting at a growing momentum for rate cuts.

According to CME's Fedwatch tool, there's about a 30% chance the Fed might cut rates by March 2024, with an expected total easing of nearly 100 basis points by year-end. Hence, the drop in the 10-year Treasury yield is weakening the US Dollar, benefiting Gold amid the overall positive market sentiment.

Furthermore, Federal Reserve officials have not dismissed the chance of further interest rate hikes, especially if economic data indicates a need for such measures. Richmond Fed President Thomas Barkin, in a statement on Monday, suggested that persistent inflation might compel the central bank to maintain higher rates for a longer period than what investors anticipate. Hence, this possible scenario could present a challenge for precious metals like Gold.

 GOLD Price Chart – Source: Tradingview
 GOLD Price Chart – Source: Tradingview

GOLD (XAU/USD) - Technical Analysis

As we step into the trading arena on November 21, gold (XAU/USD) commands attention with its lustrous performance, marking an uplift of 0.72% to stand proudly at $1,992.64. The precious metal, often a haven in tumultuous times, now thrives in a landscape shaped by dovish central bank expectations and a softening greenback.

The pivot point for the session is set at $2,006, with gold casting its gaze towards immediate resistance levels poised at $2,031, $2,068, and the lofty $2,105. These levels are not just numbers but represent psychological barriers that could dictate the metal's journey towards or away from the $2,000-mark. On the downside, the supports at $1,969, $1,943, and $1,908 stand vigilant, ready to catch a faltering price should it retreat.

Technical indicators offer a gleam of bullish hope; the Relative Strength Index (RSI) hovers at 63, signifying a strong buying momentum without venturing into overbought territory. The MACD, with a value of 0.17000, has eclipsed its signal at 5.56000, a beacon of potential growth. Additionally, the gold price, comfortably above the 50 EMA of $1,983, further cements the bullish narrative.

Chart patterns observed suggest an upward channel; a classical sign of sustained positive sentiment. The metal's triumphant breach above recent consolidation augurs well for gold enthusiasts.

In conclusion, the golden allure seems to hold steadfast above the $1,975 benchmark. Assuming this stance remains unchallenged, we may anticipate gold to grace the resistance at $2,031 in the near future. Yet, as the market anticipates the Federal Open Market Committee (FOMC) meeting minutes, every technical prognostication must be weighed against the fulcrum of forthcoming economic revelations.

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