Technical Analysis

GOLD Price Analysis – Jan 26, 2024

By LonghornFX Technical Analysis
Jan 26, 20244 min

Daily Price Outlook 

Gold price (XAU/USD) failed to stop its previous session's downward trend and remained bearish around the 2,020 level. However, the reason for its downward trend can be attributed to lowered bets for an early interest rate cut by the Fed, which exerted downward pressure on gold. In contrast to this, ongoing geopolitical risks and the uncertain global economic outlook were seen as key factors that help gold price limit its losses. Gold is set to face a second week of losses, with attention turning to the FOMC meeting on January 30-31.

Fed Rate Cut Expectations, Economic Strength, and Gold Pressures

It's important to highlight that market expectations for the Fed's first interest rate cut have shifted from March to May, which is impacting Gold price. However. this shift is influenced by positive US economic data, allowing the Federal Reserve to keep interest rates higher for a bit longer. Notably, the recent data indicates robust 3.3% annual growth in the US economy during Q4 2023, surpassing the estimated 2.0%. In the meantime, the core PCE Price Index, a measure of inflation, remained unchanged, suggesting a decrease in inflationary pressures.

Hence, this reinforces the belief that the US economy is likely to avoid a recession, overshadowing a slight increase in US Weekly Initial Jobless Claims to 214K. Moreover, the US Census Bureau reported that Durable Goods Orders were flat in December, with new orders (excluding transportation and defense) increasing by 0.3%.

Despite the drop in the 10-year US Treasury yield, the US Dollar continues to strengthen, driven by positive US economic data. This dynamic is putting pressure on Gold. The current market outlook suggests a delayed rate cut in May, in contrast to the earlier expectation for a cut in March. However, the geopolitical risks and the ongoing global economic uncertainty are expected to help safe-haven gold prices to limit its losses.

Global Concerns and Gold Outlook Amid Middle East Tensions

At the geopolitical front, Investors are worried that the conflict between Israel and Hamas might turn into a bigger regional war, involving multiple nations and groups. This concern is heightened by predictions of a global economic slowdown in 2024. As a result, people are turning to precious metals like gold as a safe investment. It should be noted that tensions are rising as the US carries out military strikes on Iranian-affiliated groups in Iraq, increasing the risk of further escalation in the Middle East.

Traders are closely watching the US Personal Consumption Expenditures Price Index for hints about the Federal Reserve's future decisions. These indicators will influence expectations for Fed policies, impacting the demand for the US dollar and determining the short-term direction of the safe-haven XAU/USD.

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

GOLD (XAU/USD) - Technical Analysis

Gold's technical landscape on January 26 exhibits a tempered advance, with the metal trading at $2,022.105, marking a modest 0.06% gain. Positioned just above a pivot point at $2,002.57, gold's immediate trajectory is clouded with a balanced mix of caution and opportunism. Resistance levels loom overhead, with $2,031.38 as the nearest hurdle, followed by $2,057.88 and $2,087.83, each potentially capping upward surges.

Conversely, supports at $1,973.77, $1,944.96, and $1,916.15 stand as bulwarks against a decline, ready to catch falling prices. The RSI, neutral at 49, and the MACD, with a mainline at 0.04 above its signal, provide no clear directional bias, underscoring a market in equilibrium.

A symmetrical triangle pattern hints at consolidation, suggesting that gold prices are coiling for a breakout that could define the next significant move. In the interim, the strategy points to a cautious buy stop at $2,027, targeting profits at $2,040, and safeguarding with a stop loss at $2,016. The immediate forecast contemplates a challenge to the resistance at $2,031.38, with a close eye on supportive floors that may come into play on any potential pullback.

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