GOLD Price Analysis – Feb 27, 2024

Daily Price Outlook

Gold price (XAU/USD) prolonged its upward trend and remained well bid around the $2,035 level. However, the upward trend in gold prices were mainly driven by the sliding US Treasury bond yields and the bearish performance of the US dollar. Furthermore, the long-lasting geopolitical tensions in the Middle East along with a recession in Japan and the UK were seen as another key factor that gave support to the safe-haven gold. On the flip side, the losses in the US dollar could be short-lived amid the Federal Reserve's (Fed) hawkish outlook for higher-for-longer interest rates. This could cap gains in the gold price.

Fed's Influence on US Dollar and Gold Prices

Despite the Federal Reserve's (Fed) hawkish outlook for higher-for-longer interest rates, the broad-based US dollar failed to maintain its upward trend and turned bearish, possibly due to the recent drop in US Treasury bond yields. However, the losses in the US dollar could be temporary as the latest meeting minutes and statements from Federal Reserve officials indicate they're not rushing to lower interest rates. Meanwhile, Kansas City Fed President Jeffrey Schmid said we should wait until we're sure inflation is under control. Most people think there won't be a rate cut in March, but there's a 60% chance there will be one in June. Hence, the current downward momentum in the US dollar is pushing gold prices higher.

Looking ahead, traders are careful about making big decisions before the release of the US Personal Consumption Expenditures (PCE) Price Index on Thursday. They want to see when the Fed might raise interest rates. This caution could make it harder for gold prices to go up.

Geopolitical Tensions and Economic Uncertainties Drive Demand for Safe-Haven Gold

Apart from this, the ongoing tensions in the Middle East are also boosting the appeal of the safe-haven precious metal. As per the latest report, Israeli attacks on Gaza since October 7 killed 29,782 and wounded 70,043. The revised death toll in Israel from the same attacks is 1,139. At the same time, the negotiations for a ceasefire between Israel and Hamas in Gaza are happening again because many countries are urging them to stop the fighting in Gaza. Whereas, Biden aims to end the conflict and secure the release of hostages by March 10, before Ramadan starts. These developments heighten geopolitical uncertainties, which push investors towards safe-haven assets like gold.

On the other hand, the recession in Japan and the UK continues to boost the appeal of the safe-haven precious metal. Japan's GDP fell unexpectedly, following a previous quarter's 3.3% contraction. The UK's decline comes before an election. Japan lost its third-largest economy status to Germany. The IMF expects Germany to surpass Japan. Economists anticipated Japan's GDP growth, but it may be revised.

Therefore, the recessions in Japan and the UK, along with Japan's unexpected GDP fall and loss of economic status to Germany, bolster the appeal of safe-haven gold amid economic uncertainties.

GOLD - Technical Analysis

Gold's technical outlook remains cautiously optimistic as the precious metal navigates through a delicate balance of market forces. As of February 27, gold is slightly up by 0.07%, trading at $2,032.61, reflecting a subtle uptick in investor sentiment amidst a backdrop of global economic uncertainties. The market's attention is fixed on the pivotal $2,028 pivot point, a level that gold has recently surpassed, suggesting a potential for further upward movement if sustained.

The immediate resistance levels are set at $2,051 and extend up to $2,093, marking significant barriers that gold would need to overcome to continue its ascent. On the downside, support levels are clearly defined at $2,011, $1,986, and $1,969, which serve as cushions should there be a reversal in the current trend. These levels are crucial for traders to monitor, as they could indicate potential entry or exit points based on the market's reaction.

From a technical perspective, the Relative Strength Index (RSI) stands at 56, indicating neither overbought nor oversold conditions, which aligns with the market's current state of equilibrium. The MACD, however, presents a mixed signal with a value of -0.09 against a signal of 2.99, suggesting that while there's potential for upward momentum, caution is warranted. The 50-day Exponential Moving Average (EMA) at $2,032 acts as a testament to gold's resilience, hovering around the current trading price and offering a baseline for bullish sentiments.