Technical Analysis

GOLD Price Analysis – March 13, 2024

By LonghornFX Technical Analysis
Mar 13, 20244 min

Daily Price Outlook

Despite the warmer US CPI report, indicating an increase in consumer prices, the price of gold (XAU/USD) continued to rise and remained steady above the $2,160 level. This upward trend was driven by the weakening US dollar, which did not strengthen even as US Treasury bond yields increased following the slightly higher-than-expected US consumer inflation for February. However, this lack of dollar strength could be attributed to the increasing belief among market participants that the Federal Reserve (Fed) will begin cutting interest rates at its June policy meeting.

In addition to this, the risk-off market sentiment, pressured by geopolitical risks, was seen as another key factor that provided support to the safe-haven gold. Meanwhile, cautious sentiment continue in the market ahead of the highly anticipated two-day FOMC monetary policy meeting starting next Tuesday. This keeps investors cautious, leading them to invest in gold as a safe-haven asset.

US Dollar Remains Weak Despite Inflation Report; Fed Rate Cut Speculation Grows

Despite the hot US inflation report, which fueled speculations that the Federal Reserve may delay interest rate cuts, the broad-based US dollar failed to gain much support and remained under pressure on the day. This is due to the growing acceptance that the Federal Reserve (Fed) will start cutting interest rates at the June policy meeting. According to the CME Group's FedWatch tool, there's about a 70% chance that the US central bank will lower interest rates at its June meeting, as per market expectations.

On the data front, the latest report on the US Consumer Price Index (CPI) shows a 3.2% year-over-year increase in February, slightly higher than the expected 3.1%. This indicates a slight uptick in inflation. Additionally, the annual Core CPI, which excludes volatile food and energy prices, came in at 3.8%, slightly above the anticipated 3.7%. These numbers suggest a continued upward trend in inflation, which could impact consumers' purchasing power and the overall economy.

Therefore, the impact of the US inflation report on the gold price was muted, as the dollar remained weak. In the meantime, the expectations of Fed rate cuts in June offset concerns about rising inflation, keeping gold attractive as a safe-haven asset. Moving on, policymakers need to closely monitor these developments to assess the need for any adjustments to monetary policy in order to maintain price stability and economic growth.

Geopolitical Developments Boost Gold's Safe-Haven Appeal

On the geopolitical front, the ongoing discussions to resolve the Israel-Hamas conflict showing no progress, which is creating uncertainty in the market. Also, Houthi rebels in Yemen, backed by Iran, plan to increase military actions during Ramadan in support of Palestinians and in response to Gaza. Furthermore, the US has conducted defensive strikes against Houthi targets following anti-ship missile attacks. These events are escalating global tension, prompting investors to seek safety in assets like gold.

Therefore, geopolitical tensions, including stalled talks in Gaza and Houthi escalations in Yemen, along with US strikes, bolster the safe-haven appeal of gold, attracting investors amid uncertainty.

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

GOLD (XAU/USD) - Technical Analysis

In today's market, gold prices exhibited a marginal decline of 0.01%, settling at $2159.745. The subtle movement in price points towards a cautious stance among investors, reflecting on broader market sentiments and economic indicators. The pivot point for today is set at $2198, suggesting a tentative balance in trader expectations.

Technical indicators for gold present a nuanced picture. The Relative Strength Index (RSI) stands at 49, hovering near the midpoint of the scale, which indicates a balanced field between buying and selling pressures. Meanwhile, the 50-day Exponential Moving Average (EMA) at 2139 underscores a potentially bullish undercurrent, as current prices flirt closely with this level.

The immediate resistance and support levels further delineate the battleground for gold's short-term trajectory. Resistance is first encountered at $2197, with subsequent ceilings at $2227 and $2252. Conversely, the asset finds immediate support at $2131, with additional safety nets at $2111 and $2090.

Conclusion: The overall trend leans towards bullish above the $2155 mark, encouraging a strategic entry point for buyers. A targeted take profit at $2197 and a stop loss set at $2132 are recommended to navigate the anticipated volatility.

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