GOLD Price Analysis – Sep 16, 2024
Daily Price Outlook
Gold prices (XAU/USD) have maintained their upward trend and remained well bid around the 2,588 level. However, they initially eased slightly from their fresh record highs in the early European session.
This dip appears to be driven by some profit-taking, as the generally upbeat market sentiment reduces the appeal of safe-haven assets like gold. Despite this pullback, the decline is expected to be limited.
Investors are eyeing a potential shift in Federal Reserve policy, with recent US inflation data suggesting the Fed might implement a larger-than-expected 50 basis point rate cut later this week.
This dovish outlook has kept both US Treasury bond yields and the US Dollar near their 2024 lows, offering continued support for gold.
Gold Prices Boosted by Weak US Dollar, Low Bond Yields, and Anticipated Fed Rate Cuts
On the US front, the broad-based US Dollar and Treasury bond yields are hovering near their lowest levels of 2024. This situation is giving gold prices a boost, as gold becomes more appealing when returns from other investments, like bonds, are low.
Traders are growing more confident about the Federal Reserve implementing a larger-than-usual rate cut, with many expecting a 50 basis point reduction later this week. This optimism follows last week's data, which indicated that US inflation is cooling off.
According to the CME Group's FedWatch Tool, there is now over a 50% chance that the Federal Reserve will lower rates by 50 basis points.
This speculation is fueled by weaker-than-expected US inflation data, including softer Consumer Price Index (CPI) and Producer Price Index (PPI) reports.
With inflationary pressures easing, investors expect the Fed to take a more aggressive stance on cutting borrowing costs, further supporting gold prices as other investments become less appealing.
Consequently, the news of potential Fed rate cuts and easing inflation supports higher gold prices, as lower bond yields and a weaker US Dollar make the non-yielding metal more attractive to investors seeking a safe-haven asset amidst lower returns on other investments.
Geopolitical Tensions and Central Bank Meetings Drive Gold Prices Amid Middle East Conflict
On the geopolitical front, the ongoing Russia-Ukraine war, along with rising tensions in the Middle East, continues to support gold prices (XAU/USD). Investors are turning to the safe-haven metal amid fears of further escalation in these regions.
However, bullish traders remain cautious and are holding off on placing new bets ahead of the highly-anticipated Federal Reserve's monetary policy meeting on Wednesday, which could provide clearer market direction.
In addition to the Fed, investors are closely watching the Bank of England and Bank of Japan policy meetings this week, which could add volatility to the markets and influence gold prices.
In Gaza, Israeli forces continue their deadly assaults, with recent strikes killing over 20 people, including children.
However, the conflict has intensified, with Yemen’s Houthis launching missiles deep into Israel. Israeli Prime Minister Netanyahu has vowed retaliation against the group, further escalating tensions in the region.
So far, the Israel-Gaza war has claimed over 41,000 lives in Gaza, with more than 200 hostages taken by Hamas during the October 7 attacks.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is trading at $2,582.26, up 0.28% as it approaches key resistance levels. On the 4-hour chart, the immediate resistance stands at $2,602.35, followed by stronger resistance at $2,608.62.
A break above these levels could pave the way for further upside momentum. However, with the RSI at 70, the asset is entering overbought territory, signaling a potential pullback.
Immediate support sits at $2,568.01, with additional support levels at $2,557.04 and $2,546.20. The 50-day EMA is at $2,539.86, providing a critical technical floor for the bullish trend.
A break below the pivot point of $2,567.53 could see gold retracing toward lower support levels, but overall sentiment remains cautiously bullish as long as prices remain above the pivot.
Traders should note the elevated RSI, which may trigger short-term profit-taking. However, the broader trend continues to favor the upside, with buyers likely targeting a sustained break above $2,602.35.
A cautious entry strategy suggests selling below $2,585, with take-profit targets near $2,567 and a stop-loss around $2,594 to protect against volatility.
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