GOLD Price Analysis – Oct 18, 2023

Daily Price Outlook

During the early European trading hours on Wednesday, gold prices (XAU/USD) extended their upward trend and remained stable around the $1,925 level. However, the reason for its upward rally can be attributed to the correction in the US Dollar. The US Dollar Index showed a slight decline, reaching 106.19. Furthermore, the escalating geopolitical tensions between Israel and Hamas were considered another significant factor contributing to the higher demand for Gold as a traditional safe-haven asset.

Strong US Retail Sales and Industrial Production Data

According to the latest report from the US Census Bureau released on Tuesday, retail sales in the US for September increased by 0.7% compared to the previous month. This performance exceeded the expectations of most experts, who had anticipated a growth of 0.3%. In the meantime, the Retail Sales Control Group, considered a crucial indicator, also saw a 0.6% increase compared to the previous month, surpassing the anticipated 0.2% growth. Hence, these figures indicate that people are spending more money, signaling a robust trend in consumer spending.

Furthermore, US Industrial Production had a strong month, showing a 0.3% increase, in contrast to the expected zero growth as forecasted by experts. Capacity Utilization, which measures the efficiency of factories, improved to 79.7%, surpassing the predicted levels. This positive development initially led to a rise in the US dollar, although the impact was short-lived.

Therefore, the strong US economic data, including increased retail sales and industrial production, led to a temporary rise in the US dollar, which in turn put pressure on gold prices.

Federal Reserve Officials Express Differing Views on Monetary Policy

It's worth noting that Thomas Barkin, President of the Richmond Fed, has emphasized that current monetary policies are already considered restrictive. He is uncertain about the decisions the US central bank will make in the upcoming November FOMC meeting, he's clear that relying solely on higher long-term bond yields is not a viable option for tightening monetary conditions.

Minneapolis Federal Reserve Bank President Neel Kashkari has joined the conversation, noting that inflation has persisted longer than initially anticipated and remains elevated. Prior to this, several Fed officials had taken a more cautious approach. Philadelphia Fed President Patrick Harker believes that raising borrowing costs and adding more economic pressure is not a wise move.

Traders will closely monitor remarks from other Fed speakers such as Waller, Williams, and Bowman on Wednesday. If they adopt a more hawkish stance, it may bolster demand for the US dollar and exert pressure on commodities like gold.

Surprising Chinese Economic Data Boosts Gold Prices

Another factor contributing to the rise in gold prices is unexpectedly positive news from China. In the third quarter, China's economy outperformed expectations with a Gross Domestic Product (GDP) growth of 1.3%, surpassing the predicted 1.0%. The annual report also revealed a 4.9% increase, exceeding the expected 4.4%.

Furthermore, China's Retail Sales displayed a more positive outlook with a 5.5% increase, surpassing both the previous 4.6% and the expected 4.9%. These promising statistics from China can make investors somewhat wary about the global economy, often leading them to invest in gold, which is regarded as a safe haven during times of uncertainty.

GOLD (XAU/USD) - Technical Analysis

Gold, the long-treasured asset and a typical hedge in times of financial uncertainty, is displaying some notable momentum as we delve into its 4-hourly technicals for October 18. As of the moment, gold is priced at $1938.51, marking an ascent of 0.79% in the past 24 hours.

The metal's immediate pivot point is set at $1932. On the upside, we're looking at a trio of resistances: $1950, $1967, and culminating at $1984. If gold were to retreat, potential supports are spotted at $1909, dropping further to $1886, and then possibly to $1869.

The RSI (Relative Strength Index) is clocking in at 72. This level, being above the standard 70 threshold, is typically interpreted as overbought conditions. However, it's essential to remember that assets can remain overbought (or oversold) for prolonged periods, especially in strongly trending markets. The MACD, another widely regarded indicator, is suggesting a bearish trend as its line is below the signal line. However, countering this bearish hint is gold's current price positioning above the 50 EMA (Exponential Moving Average) which stands at $1891, signaling a short-term bullish trend.

Chart patterns provide further insights into potential price movement, but for this analysis, no specific pattern has been mentioned. However, it's always advisable to observe for breakout or breakdown patterns, triangles, channels, or flags to make informed trading decisions.

Conclusion:

Gold's technical structure hints at a bullish inclination, especially if prices sustain above the $1932 pivot point. In the short run, traders might anticipate gold to challenge the immediate resistance levels, especially given the prevailing bullish sentiment from the price's position relative to the 50 EMA. Nevertheless, monitoring the RSI for any potential reversal signals and keeping abreast of global macroeconomic news, especially those that typically impact gold prices, will be key for those trading this precious metal.

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