Technical Analysis

GOLD Price Analysis – Feb 05, 2024

By LonghornFX Technical Analysis
Feb 5, 20243 min

Daily Price Outlook 

Gold price (XAU/USD) failed to stop its losing streak and remained under heavy selling pressure around the 2,030 level. However, the reason for its downward trend could be attributed to the previously released strong US jobs report, which increased market expectations that the Federal Reserve (Fed) will keep interest rates higher for longer. This situation boosted US Treasury bond yields and lifted the US Dollar higher. This was seen as a key factor that undermining the gold price.

In addition to this, the risk-on market sentiment, backed by the upbeat US data, was seen as another key factor that further undermined the safe-haven gold price. In contrast to this, the ongoing escalation of military action in the Middle East and increasing worries about a slowdown in China could lend some support to the safe-haven gold to limit its deeper losses. Moving on, the release of the US ISM Services PMI along with US dollar movement and broader risk sentiment will likely provide some impetus to the metal.

US Jobs Report Strengthens Dollar and Dampens Gold Prices

It's worth noting that the previously released strong US jobs report strengthened the belief that the Federal Reserve will keep interest rates higher for a longer period. This has boosted US Treasury bond yields and underpinned the US Dollar. Notably, the report revealed that the US added 353K new jobs in January, far exceeding the expected 180K. The Unemployment Rate remained stable at 3.7%, and wage inflation rose to 4.5% yearly.

Therefore, the strong US jobs report, signaling potential prolonged higher interest rates, caused a negative impact on gold prices. Investor expectations for Federal Reserve rate cuts decreased, contributing to the decline in gold prices.

Geopolitical Factors Boost Safe-Haven Appeal for Gold

Furthermore, Israel's Prime Minister Benjamin Netanyahu stated that the country won't end the conflict until it achieves all its goals. Meanwhile, the reports suggest Hamas may reject a proposed Gaza ceasefire. US forces targeted Houthi threats in self-defense, helping the gold prices. However, the concerns about the Middle East and China's economic slowdown support safe-haven gold (XAU/USD).

Therefore, the uncertainty surrounding the Gaza situation, along with the potential rejection of a ceasefire by Hamas and geopolitical tensions in the Middle East, has supported safe-haven gold.

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

GOLD (XAU/USD) - Technical Analysis

Gold's price has modestly declined in the latest trading to $2032.67, descending from its recent peak. The pivotal resistance level has now shifted to $2041.96 after the precious metal fell below the supportive trendline that was formerly at $2040.

Resistance is now just overhead at $2041.96, with additional hurdles likely near prior peaks. Conversely, initial support is found at today's low of $2032.86, with further foundational levels expected at psychologically significant numbers.

The RSI stands at 56, indicating potential for price fluctuation without being in overbought or oversold territory. Meanwhile, the 50-day EMA at $2032.455 accentuates the crucial $2030-2040 zone for immediate price action.

Given the break from the ascending channel, gold's outlook suggests a possible sell below the $2040 mark, with a close eye on subsequent market movements for confirmation.

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