Technical Analysis

GOLD Price Analysis – April 25, 2024

By LonghornFX Technical Analysis
Apr 25, 20244 min

Daily Price Outlook

Gold price (XAU/USD) was able to stop its downward rally and turned bullish around the $2,325 level, hitting an intraday high of $2,328.85. However, the reason for its upward trend can be attributed to the modest weakness in the US Dollar, which tends to benefit gold as it becomes cheaper for holders of other currencies.

Furthermore, a softer tone in equity markets has also contributed to the positive sentiment towards gold. Traders prefer to wait for more cues about the Federal Reserve's rate cut path before placing a strong position. Moving ahead, traders will keep an eye on important US economic data like the Q1 GDP report today and the PCE Price Index on Friday.

Modest USD Downtick and its Impact on Gold Price

Despite the upbeat US economic data and hawkish comments from Fed officials, the broad-based US dollar has experienced a modest downtick, providing some support to gold prices. However, the weaker dollar makes gold more affordable for holders of other currencies, leading to increased demand for the precious metal. However, the upside for gold remains limited as investors await more clarity on the Federal Reserve's rate-cutting cycle. Moving on, the focus is on key US macroeconomic data, including the Advance Q1 GDP report and the PCE Price Index, which will influence the direction of the US Dollar and, consequently, the price of gold.

On the data front, the US Census Bureau's latest report showed that in March, orders for durable goods increased by 2.6%, marking a positive sign for manufacturing. Excluding transportation, new orders rose by 0.2%. Besides, the Advance US GDP report, expected later today, is forecasted to reveal a growth rate of 2.5% for the first quarter, down from the previous 3.4%.

On the flip side, the Federal Reserve plans to maintain higher interest rates for a longer period due to ongoing inflation. This decision comes after robust US consumer inflation data and hawkish remarks from Fed officials. This was seen as one of the key factors that cap losses in the US dollar and limit the upside momentum of gold.

Geopolitical Tensions Ease, Decreasing Demand for Safe-Haven Assets

On the geopolitical front, tensions in the Middle East have cooled down, making investors less anxious about risks. This positive change in sentiment has decreased the appeal of safe-haven assets like gold. As a result, people are now more interested in investing in riskier options such as stocks or real estate.

Iran has also reduced its military presence in southern Syria after Israeli strikes, which has calmed concerns and improved market stability. This reduction in tension between Iran and Israel is good news for markets, as it lowers the risk of further conflict, giving investors more confidence and causing less demand for safe-haven assets like gold, which in turn lowers its price.

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

GOLD (XAU/USD) - Technical Analysis

As of today, gold is modestly up, trading at $2318.095, a 0.10% increase. The precious metal is currently navigating around a critical juncture on the four-hour chart, which gives us several insights into potential future movements.

Gold's current price is slightly below its pivot point at $2332.535, indicating that the bulls have yet to take full control. If they do, immediate resistance can be found at $2346.215, followed by further barriers at $2359.266 and $2382.859. These levels are essential for traders to monitor, as a break above could signal a continuation of the upward trend.

Conversely, if the price begins to descend, there is immediate support located at $2290.910. Additional support is found lower at $2268.205 and $2244.573. These marks could serve as crucial floors that, if broken, may accelerate declines in the gold price.

The technical indicators add depth to our analysis. The Relative Strength Index (RSI) stands at 40, which points to neither an overbought nor an oversold market, suggesting that there is potential room for movement in either direction. Meanwhile, the 50-day Exponential Moving Average (EMA) at $2357.463, which lies above the current price, acts as a resistance level that gold might strive to surpass in the upcoming sessions.

Considering the current market setup, a cautious trading strategy would be advisable. Placing a sell limit order at $2330 with a take profit target at $2297 and a stop loss at $2345 could capitalize on potential downward movements while managing risk effectively.

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