Technical Analysis

GOLD Price Analysis – April 24, 2024

By LonghornFX Technical Analysis
Apr 24, 20244 min

Daily Price Outlook

Gold price (XAU/USD) failed to stop its downward rally and remained well-offered around the $2,313.91 level, hitting the intraday low of $2,312.53. However, the reason for its downward trend can be attributed to the renewed strength of the US dollar, which gained traction despite the disappointing release of the US PMIs, suggesting that the economic upturn lost momentum at the start of the second quarter. Another factor weighing on the gold price was the risk-on market sentiment, supported by easing geopolitical tensions. However, the diminishing fears about further escalation of tensions in the Middle East turned out to be a key factor that continues to undermine the safe-haven precious metal.

Stronger US Dollar and Slower Economic Growth Drive Down Gold Prices

On the US front, the broad-based US dollar has been gaining momentum due to expectations that the Federal Reserve will keep interest rates high for a longer period because of persistent inflation, which is weighing down on gold prices. On the data front, the S&P Global Composite PMI fell to 50.9 in April's flash estimate, indicating that US private sector business activity grew at a slower pace. At the same time, the Manufacturing PMI unexpectedly entered contraction territory, and the Services PMI dropped from 51.7 in March to 50.9, signaling reduced economic momentum.

Therefore, the stronger US dollar, combined with a slower pace of US private sector growth and a contracting manufacturing sector, contributes to downward pressure on gold prices, reducing its appeal as a safe-haven asset.

Moving ahead, traders are focusing on the US economic docket, which features Durable Goods Orders, but the primary focus remains on the Advance Q1 GDP report and the Personal Consumption Expenditures (PCE) Price Index.

Geopolitical De-Escalation Between Israel and Iran Contributes to Gold Price Decline

On the geopolitical front, ongoing conflicts, particularly between Israel and Iran, are showing signs of slowing down, boosting market sentiment and contributing to gold's decline. While the tensions between Israel and Iran raise fears of a wider conflict, a full-scale war seems unlikely as both nations aim to avoid escalation. Iran supports groups like Hezbollah but denies direct involvement in recent attacks on Israel. Israel's retaliatory strikes are strategic, inflicting more damage on Iran's proxies.

Hence, the reduced geopolitical tensions between Israel and Iran, due to signs of a de-escalation, led to improved market sentiment. This diminishes the safe-haven demand for gold, contributing to its price decline.

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

GOLD (XAU/USD) - Technical Analysis

Today, gold prices have seen a modest uptick, rising 0.20% to a current level of $2324.955. This movement places the commodity slightly above its pivotal support at $2317.10, which has served as a baseline for today's trading activity.

The immediate resistance for gold stands at $2346.21, with subsequent barriers at $2359.26 and $2382.85. These levels must be breached to confirm a stronger bullish trend. On the downside, support is found at $2290.91, with further cushions at $2268.20 and $2244.57, which could offer buying opportunities if retested.

The Relative Strength Index (RSI) is currently at 40, indicating that gold is neither overbought nor oversold, suggesting a potential for either movement without extreme pressure from buyers or sellers. The 50-day Exponential Moving Average (EMA) is at $2364.13, highlighting a recent downward trend but with potential for reversal as prices approach this average. Additionally, gold has just completed the 23.6% Fibonacci retracement level and is eyeing the 38.2% level at around $2333, suggesting a continuation of the upward momentum if it can sustain current levels.

With the current setup, a strategic approach would involve placing a buy limit order at the pivot point of $2317, targeting a take profit at the immediate resistance of $2346, and setting a stop loss at $2296 to protect against unexpected downturns.

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