Technical Analysis

GOLD Price Analysis – March 20, 2024

By LonghornFX Technical Analysis
Mar 20, 20243 min

Daily Price Outlook

Gold prices have been facing challenges in gaining momentum recently and remained under pressure near a one-week low. However, the primary reasons for this downward trend is the strengthening of the US dollar, which has been underpinned by hawkish expectations surrounding the Federal Reserve (Fed). The Fed's indication of maintaining higher interest rates for an extended period has boosted confidence in the US currency, thereby keeping the precious metal price down.

Traders in the gold market appear hesitant to make aggressive moves, particularly ahead of the Federal Open Market Committee (FOMC) decision. Additionally, geopolitical risks, such as the ongoing conflict between Russia and Ukraine, provide some support for gold but are not sufficient to offset the broader downward pressure.

Impact of Robust US Inflation Figures on Gold Price

On the US front, the release of strong consumer and producer inflation figures in the United States last week has fueled speculation that the Federal Reserve will maintain its stance of higher interest rates for a prolonged period. This expectation has contributed to elevated US Treasury bond yields, which in turn support the US dollar and dampen demand for gold.

Historically, gold prices tend to move inversely to the US dollar, as investors often flock to the precious metal as a hedge against inflation and currency depreciation. However, the current environment of anticipated rate hikes diminishes gold's attractiveness as an alternative investment.

Investors are closely monitoring the Fed's monetary policy decisions, particularly the updated economic projections and comments from Fed Chair Jerome Powell. Any indications of a more hawkish approach to tightening monetary policy could further weigh on gold prices. Conversely, a dovish tone from the Fed could provide some relief for gold bulls, although the impact may be limited given the market sentiment.

Positive Risk Tone and Its Impact on Gold Price

Despite lingering geopolitical tensions, a generally positive risk tone in financial markets has contributed to downward pressure on gold prices. Wall Street's bullish performance, with the S&P 500 reaching record highs, reflects investor confidence and reduces the appeal of safe-haven assets like gold. The optimistic outlook is bolstered by expectations of continued economic recovery and progress in resolving global conflicts.

Traders are adopting a cautious approach, awaiting clarity on the Fed's rate-cut path before committing to significant positions in the gold market. The outcome of the FOMC meeting, including the "dot plot" indicating future interest rate expectations, will be closely scrutinized for cues on the direction of gold prices. Additionally, Jerome Powell's remarks during the post-meeting press conference could introduce volatility in financial markets and influence gold's trajectory in the short term.

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

GOLD (XAU/USD) - Technical Analysis

In today's technical outlook, GOLD's price shows a slight uptick, registering at $2159.165, marking a 0.07% increase. Analyzing the 4-hour chart, GOLD has approached key levels that signal potential future movements. The pivot point stands at $2153.10, acting as a reference for the session's bias.

Considering the current setup, the overall trend for GOLD seems cautiously optimistic, with a bias towards bullishness above the $2155 mark. Investors are advised to monitor these levels closely, as a decisive break could dictate the short-term direction. Entry is recommended above $2155, with a take profit target set at $2165 and a stop loss at $2150, to manage risk effectively.

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