Technical Analysis

GOLD Price Analysis – July 05, 2024

By LonghornFX Technical Analysis
Jul 5, 20244 min

Daily Price Outlook

Gold price (XAU/USD) maintained its upward trend and remained well bid around $2,363 per ounce, hitting the intra-day high of $2,366. This uptrend was driven by a weakening US dollar and rising speculation of Federal Reserve rate cuts.

Investors are increasingly anticipating rate cuts in September and potentially December, spurred by recent sluggish US economic indicators.

As a result, the US dollar (USD) has fallen for the fourth consecutive day, hitting a three-week low, thereby bolstering gold prices. On the other hand, the upbeat market sentiment was seen as a key factor that kept the lid on any additional gains in the Gold.

Impact of Weakening US Dollar and Anticipated Fed Rate Cuts on Gold Prices

On the US front, the broad-based US dollar continued its decline as markets increasingly anticipate interest rate cuts by the Federal Reserve (Fed) in September, with potential further cuts in December. This change in expectations comes on the heels of recent weaker US economic data.

As a result, the US Dollar (USD) has now extended its decline for the fourth consecutive day, reaching its lowest level in over three weeks. This trend has notably strengthened gold prices, highlighting their attractiveness amidst the weakening dollar environment.

On the data front, the highly anticipated Nonfarm Payrolls report is set to release later today during the North American session. Analysts anticipate the report will show the US economy added 190,000 jobs in June, a decline from the previous month's 272,000. The unemployment rate is expected to remain steady at 4%, indicating labor market stability.

However, Average Hourly Earnings growth might see a slight deceleration, with projected yearly growth of 3.9%, down from May's 4.1% increase. These figures will be closely watched as they provide crucial insights into the US economic health and could influence Federal Reserve policy decisions.

Therefore, the weakening US dollar and anticipation of potential Fed rate cuts are likely to bolster gold prices. Investors might increasingly seek alternative assets amid economic uncertainty and inflation concerns, further enhancing gold's appeal.

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

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) is trading at $2365.060, up 0.24% as of this morning's session. The 4-hour chart reveals several critical technical levels that traders should closely monitor. The pivot point at $2360.44 is pivotal, serving as a potential inflection point for either a continuation of the bullish trend or a reversal.

Immediate resistance is identified at $2368.99, followed by $2377.06 and $2384.50. Breaching these resistance levels could signal further upward momentum, potentially driving the price towards new highs. Conversely, immediate support is found at $2347.61, with subsequent supports at $2341.81 and $2336.27. These levels may provide buying opportunities if the price experiences a pullback.

The Relative Strength Index (RSI) is currently at 74, indicating that gold is approaching overbought territory. Historically, an RSI at this level suggests that the asset may be overvalued, and a price correction could be imminent. Therefore, traders should exercise caution and watch for any signs of a bearish reversal.

The 50-day Exponential Moving Average (EMA) stands at $2331.40, reinforcing the bullish trend as long as the price remains above this average. The EMA acts as dynamic support, and a sustained price above this level suggests continued bullish sentiment.

Given the current market setup, a strategic entry point for buying would be above $2360. Setting a take-profit target at $2375 aligns with the immediate resistance levels, ensuring a favorable risk-reward ratio while capturing potential upside movement. A stop-loss at $2350, just below the immediate support, helps mitigate risk from unexpected price drops.

In conclusion, while gold (XAU/USD) maintains its bullish trajectory above the 50 EMA, the high RSI and key resistance levels warrant cautious optimism.

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