Technical Analysis

GOLD Price Analysis – Jan 18, 2024

By LonghornFX Technical Analysis
Jan 18, 20243 min

Daily Price Outlook 

Gold price (XAU/USD) managed to halt its two-day downward trend and gained bullish traction around the $2,010 level. The upward rally can be attributed to the risk-off market sentiment, providing support to the safe-haven metal. Furthermore, the geopolitical tensions and concerns about a weak economic outlook for China have played a significant role in bolstering the gold price. Besides this, a modest downtick in the US Dollar (USD) has served as another factor benefiting the safe-haven gold.

Impact of Positive US Retail Sales on Economy, Interest Rates, and Gold Prices

It's important to highlight that the recent positive US Retail Sales report signals a strong economy, providing the Federal Reserve with room to maintain higher interest rates. This supports higher US Treasury bond yields, benefiting the USD and limiting potential gains for Gold. The data, which shows higher-than-expected retail sales in December, indicates robust consumer spending and overall economic strength. Fed Governor Waller's cautious stance on cutting rates adds to this narrative. The 10-year US bond yield above 4% supports the USD.

Therefore, the positive US Retail Sales report suggests a strong economy, supporting higher interest rates and US Treasury yields. This caps potential gains for Gold, a non-yielding asset, making it less attractive to investors.

Gold Gains Modestly Amid Global Concerns and Geopolitical Tensions

Moreover, the safe-haven gold has been gaining traction and maintains modest gains as investors seek safety amid global concerns. However, the geopolitical tensions and worries about China's economic outlook contribute to the precious metal's appeal. In the meantime, the slight decline in the US Dollar also supports Gold, attracting buyers around the $2,000 mark. Houthi rebels claim a second attack on a US-operated vessel, escalating tensions, while Pakistan conducts military strikes in Iran, emphasizing its commitment to protect its people.

Therefore, the Gold price benefits from global concerns, including geopolitical tensions and China's economic worries. A weaker US Dollar and escalating geopolitical events, such as Houthi attacks and military strikes, elevate Gold's appeal amid uncertainty

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

GOLD (XAU/USD) - Technical Analysis

As of January 18, Gold (XAU/USD) has shown a modest increase, trading at $2008, up by 0.09%. The chart analysis on a 4-hour timeframe indicates a pivot point at $1,993, with the metal facing immediate resistance at $2,021. Further resistance levels are seen at $2,042 and $2,069. On the support side, immediate backing is found at $1,972, followed by $1,950 and $1,930.

The Relative Strength Index (RSI) stands at 33, suggesting that Gold may be entering an oversold territory. The Moving Average Convergence Divergence (MACD) presents a value of -3.61, with its signal line at -8.27. This could indicate a potential for downward momentum, although a cautious approach is warranted given the proximity to oversold conditions.

The 50-Day Exponential Moving Average (EMA) currently sits at $2,017, reinforcing the resistance area near the $2,021 level. The observed symmetrical triangle pattern in the chart suggests a strong selling pressure, yet the entry into the oversold zone offers a counterbalance.

The overall trend for Gold appears to be at a critical juncture. Investors might consider a buy limit at 2008, with a take profit target of 2030 and a stop loss set at 1996. Short-term, Gold is expected to test its immediate resistance levels, particularly if it can sustain a move beyond the pivot point of $1,993.

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