Technical Analysis

GOLD Price Analysis – Jan 08, 2024

By LonghornFX Technical Analysis
Jan 8, 20244 min

Daily Price Outlook

Despite growing concerns about a slow economic recovery in China and the risk of further escalation of geopolitical tensions in the Middle East, the Gold price (XAU/USD) failed to halt its downward trend and dropped further around the 2,030 level. However, the reason for its strong bearish trend can be attributed to the ongoing uncertainty about the Federal Reserve's (Fed) rate-cut trajectory, which, in turn, held back traders from making aggressive bets in the non-yielding yellow metal.

Looking ahead, there's no major economic news expected from the US on Monday. However, the direction of the US dollar depends on a speech by Atlanta Fed President Raphael Bostic and bond yields. Gold prices could be influenced by overall market feelings.

Fed's Hawkish Stance and Strong Economic Indicators Diminish Gold's Appeal

It's worth noting that investors are tempering their hopes for the Federal Reserve to quickly cut interest rates due to the strong US economy and recent positive job reports. However, the resilient economy, along with some Fed officials making hawkish statements, is keeping Treasury bond yields high, supporting the US Dollar and putting pressure on Gold prices. The December job report surpassed expectations, with 216K new jobs and a steady unemployment rate of 3.7%. Despite a dip in the services sector, overall economic indicators remain strong.

Therefore, the reduced likelihood of quick interest rate cuts by the Federal Reserve, driven by a strong US economy and positive job reports, is pressuring Gold prices downward as high Treasury bond yields and a strong US Dollar dampen the appeal of the precious metal.

Heightened Geopolitical Tensions and Economic Concerns Propel Gold's Safe-Haven Appeal

Furthermore, the market mood is unstable due to concerns about a sluggish economic rebound in China and potential geopolitical tensions in the Middle East. This has led to a generally weaker conditions in the stock markets, potentially boosting the appeal of the safe-haven Gold. Traders are cautious, awaiting Thursday's release of US consumer inflation figures before deciding on the next move for Gold.

Meanwhile, the situation in China and the Middle East may bolster Gold's appeal. Notably, Hezbollah's rocket attack on Israel, following the assassination of Hamas leader Saleh al-Arouri, adds to geopolitical tensions.

Therefore, the uncertain market sentiment due to China's economic concerns and heightened geopolitical tensions in the Middle East is likely to boost the appeal of safe-haven Gold, potentially leading to an increase in its price.

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

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) has seen a modest decline in the early trading hours of January 8th, with its price dropping by 0.45% to $2,036. The precious metal is navigating a complex technical landscape, reflected in various technical indicators and chart patterns on a four-hour timeframe.

The pivot point for gold currently stands at $2,050, serving as a crucial marker for its short-term direction. Resistance levels are observed at $2,075, $2,104, and $2,104. These levels are essential as they represent potential ceilings that gold needs to breach to sustain an upward momentum.

Conversely, gold finds immediate support at $1,995, followed by $1,965 and $1,937. These support levels play a critical role in preventing further declines in the gold price. A breach below these levels could signal a more profound bearish trend.

The Relative Strength Index (RSI) for gold stands at 39, indicating a bearish sentiment without entering the oversold territory. This suggests that the market is leaning towards caution. Additionally, the Moving Average Convergence Divergence (MACD) value of -5.001, crossing below the signal line, also supports a bearish outlook.

Gold is currently trading below its 50-Day Exponential Moving Average (EMA) of $2,042, reinforcing a short-term bearish trend. Chart analysis reveals no significant patterns at this time, leaving the market direction largely dependent on the mentioned technical levels and indicators.

In summary, the overall trend for gold appears bearish, particularly below the $2,038 level. Traders and investors might consider a sell position below this mark, with a take-profit target at $2,017 and a stop loss at $2,055. Market participants are advised to monitor these key technical levels closely, as they will likely dictate gold’s price movements in the near term.

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