Technical Analysis

GOLD Price Analysis – Oct 31, 2023

By LonghornFX Technical Analysis
Oct 31, 20233 min
Signal 2023 05 25 122622 002

Daily Price Outlook

During the Asian trading session, the price of gold (XAU/USD) has experienced a second consecutive day of decline, staying below the $2,000 mark. This drop is primarily associated with speculation regarding the Federal Reserve's (Fed) potential decision to raise interest rates later this year to manage inflation and bring it back to the targeted 2%. The Fed's hints at possible rate hikes have caused a rise in yields on US Treasury bonds. Typically, higher bond yields tend to attract more investors to the US Dollar (USD), leading to an increased demand for it. Consequently, this heightened demand for the dollar puts pressure on gold.

It's worth noting that investors are hesitant to make strong predictions and are waiting for cues from the Federal Reserve’s upcoming monetary policy decisions. The Fed is expected to maintain the current high interest rates during their two-day meeting from October 31 to November 1.

In the meantime, the US economy is strong, and inflation remains above the Fed's target of 2%, allowing them to stick with their current tough stance. Fed Chair Jerome Powell previously cautioned that inflation is still too high, indicating that more rate hikes might happen if the economy continues to stay hotter than expected.

Factors Supporting Gold Price Amid Middle East and China Concerns

In addition to this, Israel's more cautious approach to its operations in Gaza has reduced concerns about a bigger crisis in the Middle East. This has made investors less eager to turn to the safe-haven of gold. However, it's important to note that there's still a risk of the Israel-Hamas conflict escalating further, and there's uncertainty about China's economic recovery. Hence, these factors are providing support to the XAU/USD.

Upcoming FOMC Meeting Adds Uncertainty for Traders

Looking ahead, traders might adopt a wait-and-see approach before making substantial decisions due to the scheduled two-day meeting of the Federal Open Market Committee (FOMC) starting this Tuesday. Nevertheless, the Fed is set to disclose its decision on Wednesday, and it is widely anticipated to maintain interest rates within the range of 5.25% to 5.50%. This would mark the highest level in 22 years.

Investors are awaiting the Federal Reserve's statements regarding its future interest rate policies, as this will significantly impact the value of the US dollar and potentially provide a new direction for gold. As a result, many investors are refraining from making significant moves until after this news is released.

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

GOLD (XAU/USD) - Technical Analysis

Gold, trading at $1,992.705, saw a marginal decline of 0.18% in the last 24 hours. Despite fluctuations, its global demand and value in the precious metals realm remain steadfast.

Examining the technicals, the pivot point is at $1,990. Key resistance levels are set at $2,025, $2,045, and $2,082. Conversely, immediate support stands at $1,970, with further support at $1,934 and $1,914.

The Relative Strength Index (RSI) reads 54, hinting at a slightly bullish sentiment. It suggests a recent tilt towards buying. However, the Moving Average Convergence Divergence (MACD) tells a cautionary tale. Its line, being below the signal line, implies potential bearish momentum ahead.

The 50-Day Exponential Moving Average (EMA) is noted at $1,974. Gold's price above this level denotes a short-term bullish trajectory, revealing active buyers in the market.

On the chart patterns front, a symmetrical triangle is observed. This indicates gold's ongoing consolidation. A breakout above this pattern signals bullish momentum, while a downward move could suggest a bearish shift.

To conclude, gold remains bullish above $2,040 but could swing bearish beneath. With current indicators and patterns, gold might challenge the $2,045 resistance soon. It's crucial for investors to monitor these key metrics closely.

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