Technical Analysis

GOLD Price Analysis – Aug 11, 2023

By LonghornFX Technical Analysis
Aug 11, 20233 min
Signal 2023 05 25 122622 002

Daily Price Outlook

Gold (XAU/USD) succeeded to stop its previous losing streak and gained some traction around $1,940 level. This happened mainly because of concerns about higher interest rates and geopolitical issues related to China.

Moreover, the weaker US dollar played a major role in boosting the price of gold. The broad-based US dollar has been struggling to strengthen due to lower consumer inflation in the US, which caused a slight decrease from its recent peak.

Thus, the declines in the US dollar have actually given a boost to the value of gold. It is like when the dollar takes a bit of a breather, gold gets a chance to shine more. Although, the reason for the US dollar's weakness is not clear, but experts expect this decline to be limited or short-lived because many believe that the Federal Reserve will stick to its plan of raising interest rates.

US Consumer Prices Inch Up, Core Inflation Eases

According to the US Bureau of Labor Statistics (BLS), the cost of living in the US, called the Consumer Price Index (CPI), went up less than expected, from 3% to 3.2% in July compared to a year ago.

Meanwhile, the Core CPI, which excludes food and energy costs, experienced a modest decrease from 4.8% to 4.7%. This suggests that the pace of price hikes for most goods and services has eased somewhat.

Although the pace of price increases has slowed down somewhat, prices still remain higher than the Federal Reserve's target of around 2%. To help with this, they might decide to change how much it costs to borrow money. They can do this by adjusting interest rates. Since prices are still higher than they want, they might decide to make some money changes later this year.

Thereby, the inreasing chances of the Fed making rules stricter are making US Treasury bond profits go up. This can help prevent the US Dollar from declining excessively and keep Gold from surging too rapidly in value. Moreover, if the outlook for US stocks remains positive, it can stop people from turning to Gold as a safe investment option.

Upcoming US Data Impact on Dollar and Gold

Looking forward, market observers are focusing on upcoming US data, including figures on producer prices, consumer sentiment, and inflation expectations. These data have the potential to influence the trajectory of both the US Dollar and Gold. Besides, developments in bond yields and the overall market sentiment will contribute to shaping the landscape.

GOLD Price Chart – Source: Tradingview
GOLD Price Chart – Source: Tradingview

GOLD (XAU/USD) - Technical analysis

The precious metal gold is currently trading with a bearish stance after breaching the critical support level at $1920. The formation of a potential double bottom pattern on the hourly timeframe suggests a potential continuation of the downtrend.

Presently, a temporary support seems to be forming around the $1915 level, which holds the potential to further drive selling pressure toward the $1900 level.

Additionally, observing the four-hour timeframe, the 50-day moving average indicates a probable resistance forming around the $1920 level. If gold manages to surpass this level, it may expose the price to the range of $1930 to $1940, where $1930 currently serves as resistance.

It's worth noting that this level previously acted as support on August 3 and August 4. In the event of increased demand for gold, a breakout above $1930 could propel the price toward $1940 to $1947.

Conversely, a breach below the recent support level of $1914 might drive the gold price down to the $1900 to $1892 range. Therefore, today's focus lies on the pivotal level of $1912, as a breakout below this point could potentially signal further selling trades.



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