GOLD Price Analysis – Oct 19, 2023

Daily Price Outlook

Gold prices (XAU/USD) experienced a significant surge on Wednesday, reaching their highest level since early August, hovering around the $1,962-1,963 mark. However, this uptick was mainly driven by growing concerns about the escalating conflict in the Middle East. Although, the continued increase in US Treasury bond yields, backed by the belief that the Federal Reserve (Fed) intends to maintain higher interest rates for an extended period, restrained gold's gains.

Furthermore, the increased demand for the US Dollar encouraged some investors to secure profits as gold prices reached higher levels, leading to a minor dip. On Thursday, gold prices sustained their upward trajectory for the third consecutive day. However, the persistent geopolitical tensions in the Middle East continue to underpin the demand for gold as a safe-haven asset. However, the expectation of a more hawkish stance from the Federal Reserve, escalating US bond yields, and a stronger USD all act as limiting factors preventing gold prices from rising further.

Gold's Stability Amid Geopolitical Tensions and Anticipation of Powell's Speech

Despite a brief dip in gold prices, they managed to stabilize around the $1,938 mark. Moreover, this stability is primarily due to ongoing geopolitical tensions, which are still driving investors toward the safety of gold. As a result, Thursday marked the third consecutive day of increased demand for this precious metal. During the early part of the European trading session, gold continued to show a positive trend. However, this upward movement remained relatively modest, indicating that investors are being cautious and refraining from making significant moves. It appears that they are awaiting a speech by Federal Reserve Chair Jerome Powell before making any bold investment decisions.

Investors are awaiting Powell's insights because his words could offer valuable information about the Federal Reserve's plans. This, in turn, is expected to significantly influence the US Dollar and the XAU/USD. As a result, people are closely monitoring the situation, eager for any hints that might guide their investment decisions.

Economic Data Impact and Fed Chair Speech Expectations

On the economic front, upbeat US Retail Sales data released on Tuesday indicates a strong end to the third quarter, leading to higher estimates for Q3 GDP. However, these positive figures have also raised concerns about persistent inflation, which could encourage the Federal Reserve to maintain a hawkish stance with higher interest rates. This, in turn, contributes to a continued rise in US Treasury bond yields, supporting the US Dollar, which limits gains for XAU/USD.

Notably, the yield on the 10-year US government bond has surged to its highest level in 16 years and is approaching the notable 5% threshold. Investors are currently keeping a close eye on several key indicators to determine short-term market trends, including the US Weekly Initial Jobless Claims, Philly Fed Manufacturing Index, and Existing Home Sales data.

GOLD (XAU/USD) - Technical Analysis

Amidst the ever-changing global economic landscape, gold's positioning stands out, often acting as a barometer for financial health and geopolitical tensions. Our analysis for October 19, based on recent market dynamics and technical indicators, paints a vivid picture for the yellow metal.

Currently, gold is priced at $1948.065, experiencing a minor decrease of 0.02% in the past 24 hours. The day's pivotal point, crucial for intraday decision-making, is at $1933.6060.

On the resistance front, the immediate level stands at $1953.4850, followed by the more significant $1982.0300, and finally, a robust resistance at $2001.0250. Conversely, support levels emerge at $1908.7160, $1885.5650, and the more pronounced level of $1869.3250.

The RSI (Relative Strength Index) stands firm at 73. With values above 70 typically suggesting overbought conditions, a pullback or price consolidation might be imminent. Meanwhile, the MACD, albeit with a marginal difference, still signals a bullish trend, marked by the MACD line sitting above the signal line.

The 50 EMA (50-Day Exponential Moving Average) is noted at $1903.3190. Gold's price remains comfortably above this mark, indicating a short-term bullish sentiment. A consistent trend above the 50 EMA often suggests a positive trajectory for the asset.

In terms of chart patterns, an upward channel is evident. Although the direction is bullish, the overextended nature of the RSI signals a potential for slight correction in the near term. Such juxtaposed indicators underscore the importance of careful trading strategies.

As of now, the trend for gold seems to balance on a knife-edge, turning bearish if it dips below $1953 and bullish otherwise.

In the short term, given the current momentum and barring any significant geopolitical or economic events, gold might strive to test the resistance at $1982.0300. Yet, traders should tread with caution, considering the looming overbought scenario.

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