Technical Analysis

GOLD Price Analysis – Jan 01, 2024

By LonghornFX Technical Analysis
Jan 1, 20243 min

Daily Price Outlook

Gold price (XAU/USD) has failed to stop its downward trend and remained well offered around the $2,063.00 level. However, the reason for its downward rally could be attributed to the recovery of the US Dollar and Treasury yields. Notably, the 10-year US Treasury yields have rebounded to near 3.90%, and the US Dollar Index (DXY) has climbed to near 101.35.

In contrast to this, the losses in the gold price could be short-lived as the more people are betting that the Federal Reserve (Fed) will cut interest rates early. This belief is driven by improvements in the job market and a clear decrease in inflation. This puts pressure on the US Dollar, making gold, which is priced in dollars, more attractive.

Anticipated Federal Reserve Interest Rate Cut and Its Impact on Gold Prices

Gold prices are anticipated to rise at the beginning of 2024, driven by expectations of the Federal Reserve lowering interest rates from March onwards. Investors are thinking that the Fed might cut interest rates by 25 basis points in 2024. According to the CME Fedwatch tool, there is a 73% probability of this, with a 72% likelihood of further rate cuts in May. The decrease in inflation to approximately 2% reinforces the prevailing belief that the Federal Reserve will opt for rate cuts to prevent conditions from becoming excessively restrictive.

If the US keeps its strict money policies for a long time, it could affect how things look for the economy, especially with more people filing for unemployment than expected, as reported by the US Department of Labor for the week ending December 22. The Federal Reserve (Fed), even though inflation is slowing down, and the job market is not doing great, is keeping interest rates the same. This is a tricky situation for the Fed because they want to balance things carefully.

Therefore, the expected decrease in interest rates by the Federal Reserve may contribute to a rise in gold prices. Investors anticipate this trend due to factors like the rebounding US Dollar and Treasury yields.

  GOLD Price Chart – Source: Tradingview
  GOLD Price Chart – Source: Tradingview

GOLD (XAU/USD) - Technical Analysis

Gold's performance at the start of the new year presents a mixed technical outlook. The precious metal, currently priced at $2,062, has witnessed a marginal decline of 0.11%. On the weekly chart, a pivot point is established at $2,024, marking a significant level for potential price movements. The immediate resistance levels are set at $2,049, $2,077, and $2,102, posing as key barriers for any upward trend. Conversely, support levels are identified at $1,993, $1,966, and $1,944, offering crucial fallback points in case of price retracements.

The Relative Strength Index (RSI), at 48, indicates a neutral market sentiment, suggesting that gold is neither overbought nor oversold. This leaves room for potential movement in either direction. The Moving Average Convergence Divergence (MACD) stands at -2.7, below its signal line at 3.0, hinting at potential downward momentum. However, the gold price is currently hovering around its 50-Day Exponential Moving Average (EMA) of $2,067, indicating a potential for short-term bullish behavior.

From a chart pattern perspective, the asset shows a tendency towards consolidation, with no clear trend emerging in the immediate term. The technical indicators, coupled with the current economic backdrop, suggest a cautious approach to gold trading in the near future. Investors and traders should watch these key levels and indicators closely, as they will likely play a pivotal role in determining gold's market trajectory in the coming days.

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