Technical Analysis

GOLD Price Analysis – Jan 16, 2024

By LonghornFX Technical Analysis
Jan 16, 20243 min

Daily Price Outlook

Gold prices (XAU/USD) failed to prolong their three-day upward trend and dropped lower near the $2,050 level during the early European session on Tuesday. However, the reason for the downward trend could be attributed to the bullish US dollar, which gained ground after hawkish comments from Atlanta Fed President Raphael Bostic. In the meantime, upbeat US Treasury yields were seen as another key factor that boosted the US dollar and contributed to the losses in gold prices. Apart from this, risk-off market sentiment, driven by the escalated Middle East conflict, was seen as one of the key factors that could help safe-haven gold limit its deeper losses.

Raphael Bostic's Remarks Propel US Dollar, Putting Pressure on Gold Prices

It's worth noting that the US Dollar Index (DXY) started Tuesday higher at around 102.90, with 2-year and 10-year US Treasury yields at 4.20% and 3.99%, respectively. However, this uptrend can be linked to increased Atlanta Fed President Raphael Bostic's optimistic remarks. Bostic warned against premature interest rate cuts, suggesting that doing so might cause inflation to fluctuate. He also mentioned that the slowdown in inflation toward the central bank's 2.0% target is expected to ease in the coming months. This news has contributed to the positive momentum of the US Dollar.

Therefore, the positive outlook for the US Dollar, driven by Raphael Bostic's comments on inflation and interest rates, has exerted downward pressure on gold prices. Gold often moves inversely to the strength of the US Dollar.

Geopolitical Tensions in Red Sea Spark Shift in Market Sentiment, Driving Demand for Safe-Haven Gold

On a different note, the tension between Israel and Gaza is spreading to the Red Sea, where the Houthi group is attacking ships. Despite recent military actions by the United States and the United Kingdom against Houthi locations in Yemen, the situation is prompting a shift in market sentiment from optimism to caution. Investors, now adopting a more careful approach, are increasingly seeking safety. People are now looking for safety, and this could mean more interest in safe-haven assets like Gold due to the increased tension in the region.

Hence, the rising tension in the Red Sea has shifted market sentiment and could boost demand for safe-haven assets like Gold due to increased geopolitical risks, potentially impacting its price positively.

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

GOLD (XAU/USD) - Technical Analysis

On January 16th, Gold faced a marginal downturn, with its price falling by 0.26% to $2,049. Analyzing the 4-hour chart, the precious metal hovers around a pivotal point of $2,021, with immediate resistance levels observed at $2,042, $2,071, and $2,091. In contrast, support levels are positioned at $1,992, $1,972, and $1,951.

From a technical perspective, the Relative Strength Index (RSI) stands at 54, indicating a somewhat neutral market sentiment. The Moving Average Convergence Divergence (MACD) presents a value of 0.984 against a signal line at 4.981, suggesting that the downward momentum may not be strongly established yet. The 50-day and 200-day Exponential Moving Averages (EMAs) are currently converging around the $2,050 level, offering a critical juncture for the metal's price movements.

A symmetrical triangle pattern is observed, extending resistance at the $2,060 mark. This formation indicates that a break below this level could lead to increased selling pressure.

In conclusion, the overall short-term trend for Gold appears to be leaning towards a bearish outlook. A recommended strategy could be to set a sell limit at 2055, with a take-profit target at 2040 and a stop loss at 2065. As always, traders should remain vigilant for potential resistance tests and market fluctuations in the coming days.

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