Technical Analysis

GOLD Price Analysis – Feb 02, 2024

By LonghornFX Technical Analysis
Feb 2, 20244 min

Daily Price Outlook 

Gold prices (XAU/USD) maintained its upward bias and remained well bid around above the $2,056 level. However, this increase was fueled by the belief that interest rates in the United States have reached their highest point. Federal Reserve Chair Jerome Powell indicated that rates have peaked and are expected to decrease in the coming months, potentially boosting gold prices. However, Powell's remarks also suggested a cautious approach, tempering expectations for an immediate rate reduction in March. Hence, the lower interest rates typically lead to increased demand for gold as a hedge against economic uncertainties.

In the meantime, the US Dollar is gaining strength, close to its highest level since December 13, thanks to the Federal Reserve's less dovish stance on interest rates. This strong US dollar was seen as a key factor limiting additional gains in gold prices. Also, the potential ceasefire between Israel and Hamas is creating a risk-on sentiment in the market, further restricting the upside for gold prices.

Moving on, investors are waiting for the release of the US monthly employment details, which could give insights into the Federal Reserve's future policies.

Powell's Rate Cut Signals and Economic Indicators Impacting Gold Prices

Fed Chair Jerome Powell hinted at possible future interest rate cuts, which eased worries and had an impact on the US Dollar. The 10-year government bond yield is below 4%, suggesting expectations of a significant rate cut in 2024. Jobless claims rose slightly to 224K, and manufacturing PMI improved to 49.1. Therefore, the powell's hint at future rate cuts, coupled with economic indicators, may boost gold prices. The anticipation of a significant 2024 rate cut and economic uncertainties could drive investors towards gold as a safe-haven asset.

Geopolitical Rumors and Economic Concerns Shape Gold Prices

Moreover, the ongoing rumors of an Israel-Hamas ceasefire and positive global market sentiment were seen s another key factor that could cap further gains in the safe-haven goldprices. Notably, unconfirmed reports suggest a ceasefire proposal, potentially easing tensions in the long-lasting war between Hamas and Israel. Besides this, Houthi rebels claim to hit a US ship, while the US responds with airstrikes in Yemen.

Furthermore, the concerns about US regional banks, triggered by New York Community Bancorp's stress in its real estate portfolio, add financial worries. These events collectively impact gold prices, with the market closely watching developments in the Middle East and the health of US lenders for potential effects on trading opportunities.

On the flip side, the ongoing worries about the health of US regional banks and concerns over China's slowing growth are causing gold prices to go up in the short term. China's Manufacturing PMI has declined for the fourth month in a row, showing challenges in the world's second-largest economy. These factors suggest that gold prices may continue to rise. Investors are keeping a close eye on the financial sector and China's economic performance for potential effects on the precious metal's value, influencing the current market sentiment.

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

GOLD (XAU/USD) - Technical Analysis

In today’s trading session, Gold has demonstrated marginal gains, now trading at $2,055, marking a slight increase of 0.01%. The precious metal's resilience is evident in its technical posture within the 4-hour chart timeframe. The pivot point, established at $2,049.698, acts as a foundational threshold for the current bullish sentiment. Gold faces immediate resistance at $2,061.771, with subsequent barriers at $2,077.027 and $2,088.169. Conversely, support levels are identified at $2,037.420, $2,025.551, and $2,014.091, providing a safety net for potential pullbacks.

The Relative Strength Index (RSI) stands at 65, indicating a strong buying interest that verges on overbought territory but still supports the bullish narrative. The 50-day Exponential Moving Average (EMA) at $2,031.701 further corroborates this view, underpinning the upward momentum gold has been experiencing.

The technical outlook for gold remains bullish as long as it stays above the $2,049 pivot point. This stance is bolstered by key technical indicators and chart patterns, suggesting that gold may continue to find buyers on dips, aiming for higher resistance levels.

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