Gold Price Analysis – Feb 19, 2024

Daily Price Outlook

Gold price (XAU/USD) extended its upward momentum, garnering increased buying interest around the $2,020 mark. The surge in gold prices was primarily driven by the weakening US dollar, despite several positive developments such as strong US economic indicators and risk-off market sentiment.

However, the remarks made by San Francisco Federal Reserve (Fed) President Mary C. Daly proposing the possibility of three rate cuts in 2024 have weighed negatively on the US dollar, thereby boosting demand for gold. Besides this, geopolitical tensions and concerns surrounding China's economic condition were seen as significant factors bolstering the appeal of the safe-haven XAU/USD pair.

Potential Rate Cuts and Market Concerns Lead to US Dollar Depreciation and Gold Surge

The US dollar faced downward pressure following comments from San Francisco Federal Reserve (Fed) President Mary C. Daly, who hinted at the possibility of three rate cuts in 2024. Daly cautioned that it's important to be careful and not let the economy run without taking necessary actions. Meanwhile, Bullard suggested lowering interest rates in March to prevent an economic slowdown, which worried investors.

Despite this, market sentiment suggests no immediate rate adjustments in the upcoming Fed meetings in March and May. The CME FedWatch Tool indicates around a 52% chance of a 25 basis points rate cut in June. On Monday, the US dollar failed to maintain its strength, initially driven by upbeat Producer Price Index data. This decline in the dollar's value led to a surge in the price of gold, highlighting investors' shifting sentiments towards safe-haven assets amid uncertain economic conditions.

Geopolitical Tensions Boost Gold's Safe-Haven Appeal

Furthermore, the ongoing tensions in places like the Middle East and worries about China's economy are making people want to invest in gold, which is seen as a safe choice during uncertain times. In the Middle East, Israeli Prime Minister Netanyahu talked about a big military move in Rafah, which caused some people to move from one area to another, leading to some casualties.

Even though President Biden is trying to stop Israel from launching a big attack, tensions are still high. Furthermore, Israel recently attacked Gaza's second-largest hospital, and Houthi fighters attacked an oil ship going to India. Because of all this trouble, people are turning to gold more, which might make its prices go up.

Gold has exhibited a promising upward trajectory in today's trading session, marking a 0.42% increase to $2021.755. This movement reaffirms gold's status as a sought-after asset amidst fluctuating market conditions. The pivot point at $2009.65 serves as a critical juncture, with the metal encountering immediate resistance at $2035.06, followed by $2057.03 and $2082.43. Conversely, support levels are established at $1987.68, $1962.27, and $1940.99, outlining potential areas for buy-backs or sell-offs.

Gold - Technical Analysis

The technical indicators provide further insight into gold's momentum. The Relative Strength Index (RSI) stands at 65, indicating a strong buying interest among investors. The Moving Average Convergence Divergence (MACD) value at 3.545, with a signal line at 0.99, suggests an upward momentum as the MACD line surpasses the signal line. Additionally, the 50-Day Exponential Moving Average (EMA) at $2011.38, alongside a noticeable 50 EMA crossover, hints at a prevailing buying trend above $2014.

The observed 50 EMA crossover is a pivotal indicator, suggesting a bullish momentum as gold prices aim to solidify their position above $2014. This pattern, coupled with candlestick analysis, underscores a robust buying trend, making it an opportune moment for investors.

The overall trend for gold appears bullish, with a recommended entry price for buying above $2014. Investors might consider taking profit at $2031 while placing a stop loss at $2000 to mitigate risks. This strategic approach is anchored in the current technical analysis, offering a calculated path for navigating the gold market.