Technical Analysis

GOLD Price Analysis – April 23, 2024

By LonghornFX Technical Analysis
Apr 23, 20244 min

Daily Price Outlook

Gold prices (XAU/USD) continued their downward rally from the previous day, staying well-offered around 2,307.55 and hitting an intraday low of 2,295.77. The reason for this downward trend can be attributed to the risk-on-market sentiment, which gained traction due to receding geopolitical tensions. It's worth noting that the easing tensions in the broader Middle East conflict have fostered a positive risk sentiment, reducing the demand for safe-haven assets like gold and contributing to its price decline.

Furthermore, better-than-anticipated US payrolls, increased consumer price inflation, and hawkish Federal Reserve statements led investors to reduce expectations for US rate cuts. This boosted the US dollar, pressuring gold prices downward due to a stronger dollar making gold more expensive for holders of other currencies.

Traders are closely monitoring upcoming events such as global PMI data, the US Q1 GDP report, and the PCE Price Index for signals on economic health. Positive data may strengthen the US dollar, potentially exerting downward pressure on gold prices.

Escalating Geopolitical Tensions in the Middle East and Their Impact on Gold Prices

On the geopolitical front, easing worries about a broader conflict in the Middle East are boosting overall market confidence, leading to a positive risk sentiment. Iran's initial indication of no retaliation following Israel's limited missile strike further contributed to this trend, marking the second consecutive day of reduced demand for gold.

However, tensions between Israel and Iran have escalated once again, with Hezbollah launching rockets at an Israeli army base in northern Israel, citing Israeli actions in southern Lebanon as the reason. The rocket attack led to retaliatory strikes from Israel, with casualties reported on both sides. Iran issued a warning in response to these events, denouncing recent Israeli actions near Isfahan. Additionally, rockets from northern Iraq targeted a US-led coalition in Syria, resulting in defensive measures.

Therefore, the re-intensified tensions in the Middle East, particularly between Israel, Iran, and Hezbollah, can lead to increased market uncertainty and risk aversion, boosting demand for safe-haven assets like gold and helping limit the gold declines.

Impact of Economic Indicators and Fed Rate Expectations on Gold Prices

On the US front, the broad-based US dollar gained momentum and remained well supported by better-than-expected job numbers, rising consumer prices, and hawkish statements from the Federal Reserve, which caused investors to rethink their projections about US interest rates.

However, reduced expectations for interest rate cuts by the Federal Reserve (Fed) are supporting the US dollar and causing gold to drop to a more than two-week low. They now anticipate the Fed might start reducing rates in September, with expectations lowered to about 34 basis points, equivalent to less than two rate cuts for 2024. This contrasts with the Fed's forecast of three cuts.

Therefore, strengthening the US dollar due to better economic indicators and reduced expectations of Fed rate cuts pushed gold prices to a two-week low, with investors now expecting fewer rate cuts in 2024.

GOLD Price Chart - Source: Tradingview
GOLD Price Chart - Source: Tradingview

GOLD (XAU/USD) - Technical Analysis

On April 23, gold prices saw a downturn, closing at $2301.98, which is a decline of 1.08%. This downward movement pushes the price beneath crucial technical thresholds that could impact the short-term market outlook significantly.

At $2325, the pivot point marks a notable barrier that gold failed to breach, suggesting a potential resistance area for any bullish attempts. Additional resistance levels at $2361, $2402, and $2432 may serve as further challenges for upward price movements. On the flip side, support levels at $2291, followed by $2268 and $2245, are key zones where buyers might find value, potentially halting further declines.

The Relative Strength Index (RSI) currently stands at 27, indicating that gold is in the oversold territory. This could hint at a potential rebound or underscore the prevailing selling pressure. The 50-Day Exponential Moving Average (EMA) positioned at $2368, alongside a bearish engulfing candlestick pattern, reaffirms the dominant downtrend in the market.

Given these conditions, traders might consider a sell strategy below the pivot point at $2315, targeting a take-profit point at $2280, with a stop-loss order set at $2340.

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- AUD/USD Price Analysis – April 23, 2024

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