Technical Analysis

GOLD Price Analysis – Aug 30, 2023

By LonghornFX Technical Analysis
Aug 30, 20233 min
Signal 2023 05 25 122622 002

Daily Price Outlook

Despite the weaker US dollar and a sharp drop in US Treasury yields, the Gold Price (XAU/USD) is struggling around $1,935 during early Wednesday in Europe. However, the sluggish movement can be attributed to the probability of more rate hikes by the Federal Reserve (Fed), which could limit gold's rise. As we all are well aware, the dynamics of gold prices are influenced by several factors. Among these, the movement of interest rates plays a notable role. When interest rates rise, gold's appeal tends to diminish due to its lack of inherent yield-generating capacity.

On the contrary, the escalating tension between the US and China was seen as another key factor that could benefit gold, given its traditional role as a safe-haven asset. On the other hand, the announcement of China’s stimulus measure boosted investors' confidence and contributed to the gold prices gains.

Gold's Safe-Haven Appeal Amidst US-China Tensions

Elsewhere, the growing tension between the US and China will likely played a major role in boosting gold, a traditional safe-haven asset. US Commerce Secretary's recent visit to Beijing highlighted American concerns about business challenges and national security. The talks also covered China's limits on exporting certain materials.

This news could potentially raise demand for gold due to its status as a safe-haven asset amidst escalating US-China tensions and concerns about business disruptions and national security. Moving on, investors are keeping an eye on how the US-China relationship evolves, which could impact the market.

China's Stimulus Measures and Potential Impact on Gold

On the flip side, gold prices might also get a lift from China's new stimulus measures. Over the weekend, Chinese authorities announced a plan to lower the 0.1% tax on stock trading. This move aims to boost the capital market and make investors feel more confident. Alongside this, the China Securities Regulatory Commission is taking steps to support listed companies after the country's stock market dropped to its lowest point in nine months.

These positive actions to stimulate the economy could prevent gold prices from dropping too much. It's worth noting that China is a major consumer of gold globally, adding to the potential impact on gold's value.

Impact of Potential Fed Rate Hikes on Gold Prices

In contrast to this, the chance of the Federal Reserve (Fed) raising interest rates more could limit how much gold prices go up. It's important to know that gold can react to higher interest rates because they makes it less appealing compared to other investments. Recently, Fed Chair Jerome Powell talked at the Jackson Hole Symposium and hinted about the possibility of more rate hikes. But he also said it would depend on the data they get.

Currently, the market predicts about a 16% chance of a rate hike in the next meeting, down from 20% before. This prediction can lead to some pressure on the US dollar, which in turn affects gold prices.

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

GOLD (XAU/USD) - Technical analysis

Gold's price experienced a robust upward surge yesterday, resulting in a significant breach of our initial target at $1,929.00. This breakthrough has solidified the path for further gains, with the next primary objective projected at $1,945.20.

The persistent influence of the double bottom pattern remains in effect, bolstering the likelihood of continued upward movement. It's important to highlight that a breach below $1,929.00 would exert downward pressure on the price, potentially leading it towards a crucial intraday support level at $1,913.15, before a definitive trend direction is determined. The projected trading range for today spans from $1,925.00 as the support to $1,950.00 as the resistance.

In terms of the anticipated trend for today, a bullish sentiment is expected to prevail.



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