GOLD Price Analysis – Sep 23, 2024
Daily Price Outlook
Gold (XAU/USD) has extended its early bullish rally, trading around the 2,627 level and reaching an intraday high of 2,631.
This upward movement is driven by a weaker US dollar, which has struggled following the Federal Reserve’s shift towards a monetary easing cycle and increasing expectations for further rate cuts this year.
Analysts anticipate an additional 75 basis points (bps) of cuts in 2024, following last week’s aggressive 50 bps reduction to a 4.75-5.00% range. This monetary policy shift is a key factor propelling gold prices higher.
Furthermore, the heightened geopolitical tensions in the Middle East have created a risk-off market sentiment, prompting investors to seek refuge in safe-haven assets like gold.
Fed Rate Cuts Weaken US Dollar, Boost Gold Prices
On the US front, the broad-based US dollar has been flashing red after the Federal Reserve (Fed) cut interest rates by a larger-than-usual half-percentage point to a range of 4.75% to 5.00%. This decision aims to support the economy while keeping unemployment low as inflation starts to ease.
Fed Chair Jerome Powell emphasized that this move reflects the policymakers' commitment to these goals. Furthermore, Fed officials expect another 75 basis points (bps) of rate cuts by the end of the year, which could further weaken the US dollar.
Meanwhile, Philadelphia Fed President Patrick Harker highlighted that the central bank has successfully navigated a challenging economic environment in recent years. He pointed out that both "hard" and "soft" economic data play crucial roles in their decision-making process.
Therefore, the Fed's rate cuts and a weaker US dollar typically boost gold prices, as gold becomes more attractive to investors seeking safe-haven assets. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, driving demand higher.
Escalating Middle East Tensions Boost Demand for Gold
On the geopolitical front, tensions in the Middle East are escalating as Israeli forces have launched new attacks in southern and eastern Lebanon, resulting in at least one civilian death.
Concerns about a potential full-scale war are growing, especially after Hezbollah declared a "battle of reckoning" with Israel. In Gaza, Israeli airstrikes have tragically killed a mother and her four children, along with several others in attacks on schools that are currently serving as shelters.
However, the humanitarian toll is staggering, with at least 41,431 people reported killed and 95,818 injured due to the ongoing conflict in Gaza.
Consequently, the escalating tensions and humanitarian crisis in the Middle East typically increase demand for safe-haven assets like gold.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is showing bullish momentum as the price continues to edge higher, currently trading at $2,624.20, up by 0.27%.
The recent price action suggests the market is testing critical resistance levels, while overall momentum remains strong. With a 4-hour chart timeframe, traders are focusing on key technical levels to gauge the next possible moves.
Gold is hovering near the pivot point at $2,630, which serves as both an immediate resistance and a crucial level to watch. A successful break above this point could see gold testing higher resistance levels at $2,639 and $2,648.
However, if the price fails to breach this level, we could see a pullback toward immediate support at $2,609. Below that, key support levels lie at $2,600 and $2,589, which will be crucial to maintaining the overall uptrend.
The technical indicators support the bullish outlook. The RSI is at 71, indicating that gold is in overbought territory, which could potentially lead to a short-term correction.
Nevertheless, the 50-day EMA at $2,585 is providing a strong base for the upward trend, suggesting that any dips could be viewed as buying opportunities.
In conclusion, the current technical setup favors a buy-above strategy with an entry price at $2,616.
Traders should target $2,630 for profit-taking, while setting a stop-loss at $2,610 to manage downside risk. Given the overbought conditions, a cautious approach is advised as gold approaches key resistance.
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