Technical Analysis

GOLD Price Analysis – June 21, 2024

By LonghornFX Technical Analysis
Jun 21, 20244 min

Daily Price Outlook

Gold price (XAU/USD) maintained its upward trend and remained well bid above the 2,362 level, hitting an intraday high of 2,368 level. However, the reason for its upward trend can be attributed to combination of factors including a weaker US dollar. The US dollar dropped following recently released disappointing US economic data. This reinforced market expectations that the Federal Reserve will soon start its interest rate cuts program.

Apart from this, rising concerns about the US economy led to a risk-off sentiment in markets, which increased demand for gold as a safe-haven asset, further supporting its higher prices.

Impact of US Economic Trends and Fed Policy on Gold Prices

On the US front, the broad-based US dollar has been flashing red and remains under pressure due to recently released disappointing economic data. This has strengthened expectations that the Federal Reserve will soon begin easing its policies. Although Fed officials initially indicated a preference for maintaining higher interest rates, market sentiment has shifted.

Investors now believe there is a strong possibility of an interest rate cut at the next policy meeting, but they only expect one cut to occur this year. This anticipated policy shift is a response to the weakening economic indicators and the need to stimulate economic growth.

Minneapolis Fed President Neel Kashkari's remarks indicate confidence in the economy's strength but suggest a prolonged timeline of one to two years to achieve the Federal Reserve's inflation target of 2%. This suggests a cautious approach to inflation management despite overall economic health.

Richmond Fed President Tom Barkin highlighted the Fed's readiness to employ various policy tools to address economic challenges. His emphasis on adapting policies based on current economic data underscores the Fed's flexibility and responsiveness in navigating uncertainties and ensuring economic stability amidst evolving conditions.

On the economic data front, the US Department of Labor reported that new applications for unemployment benefits dropped to 238,000 in the week ending June 15, slightly surpassing the expected 235,000. Meanwhile, the Commerce Department's Census Bureau indicated a 5.2% decline in Housing Starts for May, falling to a seasonally adjusted annual rate of 982,000 units. Building Permits also decreased by 2.9% to 949,000 units during the same period.

Additionally, the Philadelphia Fed Manufacturing Index unexpectedly fell to 1.3 in June from 4.5 the previous month, marking its fifth consecutive month in positive territory despite the decrease.

Therefore, the weakening US dollar and potential Fed rate cuts amid mixed economic data could support gold prices by lowering the dollar's value and signaling economic uncertainty, bolstering safe-haven demand for precious metals.

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

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) is trading at $2363.585, up 0.15% in the early European session. The pivot point at $2365.503, marked by the green line, is critical for short-term trading strategies. Immediate resistance levels are observed at $2372.585, $2378.588, and $2387.253. These levels indicate where bullish momentum might encounter selling pressure. On the downside, immediate support is at $2355.424, followed by $2347.821 and $2338.626. These support levels could act as potential buy zones if the price declines.

Technical indicators reveal that the Relative Strength Index (RSI) stands at 66, suggesting the asset is approaching overbought territory. The 50-day Exponential Moving Average (EMA) is positioned at $2332.486, indicating an underlying bullish trend as the current price is above this average. This technical setup suggests that gold has upward momentum, but caution is warranted as it nears resistance levels.

Given this outlook, traders might consider selling below the pivot point of $2365, with a take profit target at $2350 and a stop loss at $2372. This strategy is supported by the immediate resistance just above the pivot point and the overbought RSI indicating potential for a pullback.

In summary, gold's current price action is influenced by technical levels that are crucial for short-term traders. The immediate resistance at $2372.585 and the support at $2355.424 will be key in determining the next direction for gold prices.

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