Technical Analysis

GOLD Price Analysis – Dec 04, 2023

By LonghornFX Technical Analysis
Dec 4, 20234 min

Daily Price Outlook

Gold prices (XAU/USD) maintained its upward rally and spiked to a fresh record high around the $2,144-2,145 region during the Asian session on Monday. However, the reason for its upward trend can be attributed to expectations that the Federal Reserve has ended its series of interest rate hikes and may commence easing its monetary policy by the first half of 2024. These expectations are acting as a supportive factor for gold, given its status as a non-yielding asset.

Global Concerns Drive Investors to Safe-Haven Assets

It is worth noting that escalating tensions in the Middle East and growing concerns about a new respiratory illness in China are contributing to a uncertainity among investors. This cautious sentiment is impacting stock markets, with individuals showing a preference for safer assets such as gold. The positive momentum in the global market experienced a setback when Iran-backed Houthi rebels launched an attack on an American warship in the Red Sea. In response, the US took defensive action, resulting in the elimination of five militants.

The situation in the Middle East, coupled with the increasing cases of the respiratory illness in China, is fostering uncertainty among investors. Consequently, there is a shift towards gold as a safe-haven asset amidst the uncertainties in geopolitical and health-related scenarios.

Fed Policy Speculations Impacting Gold Prices

Another factor contributing to the rise in gold prices has been the anticipation that the Federal Reserve (Fed) would keep things as they are in December and might start lowering interest rates by March 2024. However, Fed Chair Jerome Powell said on Friday that it's too early to say when they'll make any changes, pushing back against the idea of quick rate cuts. Powell's comments push back against the notion of imminent rate cuts, providing clarity on the Federal Reserve's stance.

Despite this, investors seem convinced that the Fed will shift its policy soon, causing the 10-year US Treasury yield to drop. Consequently, the anticipation of a more accommodative stance from the Fed is exerting downward pressure on the US Dollar, thereby offering additional support to the XAU/USD.

Looking ahead, traders seems hesitant to place any strong positions as they await significant US economic data this week, particularly the release of Factory Orders data scheduled for Monday. This data has the potential to influence the USD and may provide momentum to XAU/USD.

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

GOLD (XAU/USD) - Technical Analysis

Gold is currently exhibiting a bullish trend in the market, as evidenced by its latest trading price of $2086, marking an upswing of 0.68% within the last 24 hours. This uptrend is further accentuated by its position above the 50-day Exponential Moving Average (EMA), which currently stands at $2063, signifying a short-term bullish momentum.

Key price levels for Gold include a pivotal point at $2098. Immediate resistance levels are set at $2123, with subsequent barriers at $2173 and $2221. On the downside, immediate support is established at $2049, followed by stronger levels at $2024 and $1976. These levels will be critical in determining the direction of Gold’s price in the short term.

Technical indicators add depth to this outlook. The Relative Strength Index (RSI), at a high of 78, indicates overbought conditions, suggesting that Gold may see a temporary pullback or consolidation in the near future. However, the bullish sentiment remains intact as long as the RSI stays above 50. The Moving Average Convergence Divergence (MACD) values, with the MACD line at 3.61 and the signal line at 15, further reinforce the bullish sentiment, although caution is warranted given the potential for a reversal.

A key chart pattern observed in Gold's price action is the completion of a 50% Fibonacci retracement at $2090, signaling a possible retracement to the 61.8% level. This pattern suggests that while the overall trend is bullish, particularly above the $2075 mark, there could be some downward movement before Gold resumes its upward trajectory.

In conclusion, the overall trend for Gold remains bullish, particularly above the critical level of $2075. However, traders should watch for potential pullbacks, especially given the overbought conditions signaled by the RSI. The short-term forecast anticipates that Gold may test its immediate resistance levels, but vigilance is advised in monitoring these key technical indicators and chart patterns.

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