Technical Analysis

GOLD Price Analysis – Oct 09, 2023

By LonghornFX Technical Analysis
Oct 9, 20234 min
Signal 2023 05 25 122622 002

Daily Price Outlook

Gold prices (XAU/USD) have been consistently on the rise, demonstrating a strong bullish momentum. However, on Friday, they experienced a significant drop, reaching their lowest point since March 8. This decline was primarily attributed to the release of the US jobs report, which hinted at the possibility of more interest rate hikes by the Federal Reserve in 2023.

Interestingly, the situation took a swift turn on Monday as gold experienced a remarkable rally, surging by over 1.3% and reaching a one-week high. The sharp shift in sentiment was driven by escalating tensions in the Middle East, prompting investors to turn to gold as a safe-haven asset of choice.

In contrast to this, the anticipation of the Federal Reserve raising interest rates and the resultant increase in US bond yields bolstered the US dollar. This, in turn, imposed a limitation on the gold's gains.

Gold Prices Surge Amid Middle East Tensions, Await Key Economic Data

It is worth noting that the price of gold (XAU/USD) experienced a continuous uptrend at the start of the week, primarily attributed to the escalating tensions in the Middle East. This surge propelled gold to its highest level in over a week, particularly during the Asian trading session. However, despite its upward momentum, gold encountered significant resistance when attempting to breach the $1,855 mark.

However, the driving force behind this sudden spike in gold prices is that investors tend to turn to gold when global tensions rise, seeking a safe place for their money. The situation in the Middle East became increasingly complex as Israel officially declared war against the Palestinian Hamas group. This escalation in conflict further exacerbated investor anxiety, subsequently providing additional momentum to gold prices.

Looking ahead, traders are now waiting for two important events this week: the release of the Federal Open Market Committee (FOMC) meeting minutes and US consumer inflation figures. These releases could influence gold prices, as they provide insight into the Fed's monetary policy and inflation trends.

US Job Growth Positive, but Modest Wage Growth Eases Inflation Concerns

Despite the positive job growth reported in the US, wage growth for the same month remained modest, alleviating concerns about inflation and its potential impact on the Federal Reserve's monetary stance. As a result, the US Dollar (USD) faced its third consecutive day of declines, leading to a surge in the Gold market that broke a nine-day losing streak.

The September report revealed the addition of 336,000 jobs, surpassing expectations, and the previous month's job figures were revised upward from 187,000 to 227,000. However, wage growth only increased by 0.2% for the month, matching August's performance, resulting in a 4.2% annual increase, slightly lower than the previous 4.3% growth.

Despite this data, the market still anticipates at least one more interest rate hike by the Fed in 2023, maintaining relatively high US bond yields and supporting the US Dollar.

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

GOLD (XAU/USD) - Technical Analysis

Gold is a coveted asset known for its consistent ability to capture the attention of global investors. As of today, the yellow metal's price stands at a promising $1,830, signaling a subtle upward movement within a 24-hour window. Delving into specific metrics, Gold has seen a trading volume of $6,726,380,059 and a marginal gain of 0.10% in the past day. However, it's important to note that the provided data, seemingly relevant to Bitcoin, might require further adjustment to align with Gold's specific statistics.

Reviewing the chart from a 4-hour timeframe, several key price levels emerge:

    From a technical indicator standpoint, the Relative Strength Index (RSI) reads at 70. Typically, an RSI above 70 suggests that the asset may be entering overbought territory. This often implies potential pullbacks or corrections, especially when an asset remains in this range for an extended period.

    Meanwhile, the 50-day Exponential Moving Average (EMA) for Gold is marked at $1,846. This could be interpreted as a short-term bullish trend, given that the price is currently above this figure.

    The chart patterns give an interesting observation. Gold has managed to achieve 61.8% of its Fibonacci retracement at $1,856. Coupled with the overbought RSI, an inability to surge past this Fibonacci level might trigger a potential sell-off.

    Conclusion: While the immediate trend for Gold seems to tilt towards the bullish side above $1,855, it's essential to approach with caution due to the overbought indicators. A failure to sustain above the $1,856 mark could tilt the balance bearish, paving the way for a potential pullback in prices. As always, monitoring global economic cues and geopolitical events will provide additional clarity for traders and investors alike.

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