Technical Analysis

GOLD Price Analysis – Feb 01, 2024

By LonghornFX Technical Analysis
Feb 1, 20244 min

Daily Price Outlook 

Despite the bullish US dollar, the safe-haven gold price (XAU/USD) maintained its fourth consecutive day of an upward trend and remained well bid around the $2,050 level. However, the reason for its bullish trend could be associated with geopolitical risks and China's economic woes, which continue to support the safe-haven appeal of gold. In contrast to this, the US Dollar gained significant traction and stands near its highest level since December 13, supported by the Federal Reserve's (Fed) less dovish outlook on interest rates. This bullish US dollar was seen as a key factor that kept a lid on any additional gains in the gold price. Additionally, a risk-on sentiment in the market further contributes to capping the upside for the gold price.

Gold's Safe-Haven Appeal Amid Middle East Tensions and Economic Worries

It's important to highlight that investors are concerned about the possibility of increased military tensions in the Middle East. Moreover, worries about a slowdown in China's economic growth are also supporting the safe-haven status of gold (XAU/USD). It should be noted that the European Union plans to launch a naval mission in the Red Sea to protect cargo ships from Houthi rebel attacks. This aims at easing trade disruptions and preventing price hikes. On a positive note, a recent private-sector survey indicated that China's manufacturing sector has maintained a steady expansion for the third consecutive month in January.

Therefore, concerns over Middle East tensions and China's economic slowdown are boosting gold's safe-haven appeal. The EU's naval mission to protect trade could further support gold prices amid global uncertainties.

US Dollar Strength and Fed Outlook Impact on Gold Prices

Moreover, the broad-based US Dollar has been gaining traction and holding strong, reaching its highest level since December 13. This strength is fueled by the Federal Reserve's less dovish stance on interest rates. Notably, the Fed left interest rates steady but hinted at potential cuts later this year, pushing Treasury bond yields lower and supporting gold prices. Despite expectations, Fed Chair Jerome Powell dismissed March rate cuts, reducing the market's probability from over 60% to 35%. This less dovish outlook keeps the US Dollar firm, limiting further gains for gold.

Therefore, the robust US Dollar, driven by the Federal Reserve's cautious approach to rate cuts, poses a challenge for Gold and limits its gains..

Looking forward, investors are keeping thier eye on key events like Eurozone consumer inflation data, the US ISM Manufacturing PMI, and the Bank of England's monetary policy decision. These factors, along with US bond yields, USD movement, and overall market sentiment, could create short-term trading chances for Gold prices.

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

GOLD (XAU/USD) - Technical Analysis

Gold's market performance remains a focal point for investors, particularly as the precious metal trades at $2,046.25, marking a modest increase of 0.35% in the last 24 hours. This upward movement situates gold firmly within bullish territory, as evidenced by key technical indicators and market dynamics. The pivot point for gold is established at $2,034, serving as a foundational support level that has guided recent price movements.

Immediate resistance levels are identified at $2,051, $2,063, and $2,075. These thresholds represent critical barriers that gold needs to surpass to sustain its upward trajectory. On the support side, gold finds solid ground at $2,022, with further cushions at $2,006 and $1,994, which could play pivotal roles in the event of a price retracement.

The Relative Strength Index (RSI) stands at 61, hinting at a bullish momentum without veering into overbought territory. The Moving Average Convergence Divergence (MACD) indicator, with a value of 4.91 over the signal line of 0.84, suggests a strong bullish momentum. The 50-day Exponential Moving Average (EMA) at $2,041 further confirms gold's current strength, aligning closely with the pivot point to provide additional support. An upward trendline has been supporting gold above the $2,037 level, suggesting a continued bullish outlook.

Given these factors, the overall trend for gold is bullish, with a recommended entry price for buyers above $2,040. Investors should consider taking profit at $2,055 and setting a stop loss at $2,030 to manage risk effectively. This comprehensive analysis underscores a positive outlook for gold, driven by solid technical support and bullish indicators.

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