Technical Analysis

GOLD Price Analysis – June 11, 2024

By LonghornFX Technical Analysis
Jun 11, 20243 min

Daily Price Outlook

The price of gold (XAU/USD) continued its downward trend, remaining under pressure around $2,303 and hitting an intraday low of $2,297. The decline was largely driven by the positive US Nonfarm Payrolls data released on Friday, which sparked speculation that the Federal Reserve might maintain higher interest rates for an extended period.

This bolstered the US dollar, contributing to the drop in gold prices. However, ongoing political instability in Europe and various geopolitical risks are expected to potentially mitigate further losses in gold prices.

Traders appear hesitant to take strong positions as they await the release of the latest US consumer inflation data and the upcoming FOMC decision on Wednesday. These events are expected to provide insights into the timing of potential rate cuts by the Federal Reserve.

Impact of Reduced PBoC Buying and European Political Uncertainty on Gold Prices

On the flip side, the People's Bank of China (PBoC) sharply reduced its gold buying in May, ending a one-and-a-half-year buying spree and contributing to the decline in gold prices. However, political uncertainty in Europe, such as French President Emmanuel Macron's decision to call snap elections, could support gold prices by increasing demand for safe-haven assets.

Additionally, ongoing geopolitical risks might help limit further losses for gold, despite the pressure from a stronger US dollar and reduced expectations of an imminent interest rate cut by the Federal Reserve.

Bullish US Dollar and Rate Cut Expectations Impact On Gold Prices

On the US front, the broad-based dollar has strengthened following positive jobs data, reducing expectations of an imminent interest rate cut by the Federal Reserve in September. This has kept US Treasury bond yields high, bolstering the dollar and weakening demand for gold.

Speculation that the Fed will maintain higher rates for a longer period has lowered the probability of a September rate cut to about 50%, with markets now anticipating only one 25 basis point cut later in the year.

This has pressured gold prices, as the stronger dollar and reduced likelihood of a September rate cut have diminished the metal's appeal to investors.

This has led to a decline in gold prices as the stronger dollar and reduced rate cut expectations weigh on the precious metal. Traders are cautious amid uncertainty about the Fed's future policy decisions.

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

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) has experienced a modest decline of 0.39%, bringing its price to $2305.92. The 4-hour chart indicates a pivot point at $2305.19, just above the current trading price. Immediate resistance is noted at $2324.00, which, if breached, could lead to further gains towards $2354.43 and $2376.51.

However, if the price fails to overcome this resistance, it could continue to trend downwards. On the downside, immediate support is found at $2277.44, with additional support levels at $2255.06 and $2235.81, providing potential entry points for buyers looking to capitalize on lower prices.

The Relative Strength Index (RSI) is currently at 40, reflecting bearish momentum but not yet indicating an oversold condition. This leaves room for additional downward pressure before any significant rebound occurs.

Additionally, the 50-Day Exponential Moving Average (EMA) is at $2335.95, reinforcing the bearish outlook as the price remains below this critical moving average.

In conclusion, given the current technical indicators and price levels, a bearish strategy is advisable. An entry price with a sell stop at $2305 is recommended, targeting a take profit at $2277, while maintaining a stop loss at $2324 to mitigate risk.

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