Technical Analysis

GOLD Price Analysis – Nov 01, 2023

By LonghornFX Technical Analysis
Nov 1, 20234 min
Signal 2023 05 25 122622 002

Daily Price Outlook

The price of gold (XAU/USD) persists in its decline, marking the third successive day of a downtrend on Wednesday. As the European trading session commences, the precious metal exhibits a bearish posture, hovering around the weekly low in the vicinity of the $1,978 mark. The de-escalation of tensions over the Israel-Hamas conflict, along with the market's anticipation of a more hawkish stance from the Federal Reserve (Fed), are key factors exerting downward pressure on gold, which does not yield any interest.

Despite the downward trend, the decline in gold prices is expected to have a floor. The market's attention is keenly set on the outcome of the much-awaited two-day FOMC monetary policy meeting, which is due to be announced in the later part of the US session. Additionally, the concerns regarding China's fragile economic recovery as the fourth quarter commences might lend some support to the safe-haven metal, potentially curbing steeper drops.

Factors Propelling the US Dollar and Their Effect on Gold Prices

Currently, the US dollar is enjoying a positive sentiment, bolstered by the market's anticipation of a potentially hawkish outcome from the FOMC meeting. The Federal Reserve is anticipated to keep interest rates at a 22-year peak for the second consecutive period, later in the US session.

Given the robust performance of the US economy and ongoing inflation, the central bank is expected to continue its hawkish stance, leaving the door open for additional interest rate hikes. The yield on the crucial 10-year US government bond hovers near the 5% threshold, a high not witnessed in 16 years since October. This strength in bond yields is further fortifying the US dollar, which in turn, is applying downward pressure on gold prices.

Recent Developments and Their Impact on the Gold Market

Furthermore, a recent Caixin-sponsored survey revealed a contraction in China's manufacturing sector business activity in October, the first decline in three months. This suggests that China's stimulus measures have had limited impact on the economic recovery, which might provide some support to the XAU/USD.

Although gold recorded its most substantial monthly gain since November 2022, it commenced the new month on a softer note, influenced by a diminished demand for safe-haven assets. The market's concerns about the Israel-Hamas conflict have abated, as no other Arab nations have engaged in the conflict, and there is an indication from Hamas about the intention to release foreign hostages in the forthcoming days.

GOLD Price Chart – Source: Tradingview
GOLD Price Chart – Source: Tradingview

GOLD (XAU/USD) - Technical Analysis

Gold has experienced a minor pullback in its recent rally, currently trading at $1,977.935, a slight decline of 0.31% within the last 24 hours. The asset's performance on the 4-hour chart reveals a critical juncture, with the price teetering near the pivot point of $1,990.

Key technical levels are in focus, with immediate resistance spotted at $2,026. A breach above this level could see gold target subsequent resistances at $2,046 and $2,082. Conversely, immediate support lies at $1,970, below which further supports are seen at $1,934 and $1,914.

The Relative Strength Index (RSI) presents a neutral stance with a reading of 57, indicative of neither overbought nor oversold conditions, but slightly leaning towards bullish sentiment. However, with the RSI drifting below the 60 mark, it warrants cautious optimism among bulls.

The 50-Day Exponential Moving Average (EMA) at $1,977 offers a glimmer of bullishness, with the current price hovering just above this level, suggesting a short-term upward trend.

A notable development is the upward channel breakout observed in the chart patterns, hinting at potential bullish momentum. However, the recent price action below the pivot point and the RSI's tepid posture offer a mixed sentiment.

In conclusion, gold presents a nuanced technical outlook. While the asset shows bearishness below the $1,980 threshold, a decisive move above this level could alter the short-term trajectory. Investors should brace for a potential test of the immediate resistance at $2,026 in the coming days, with a close eye on the RSI and the 50 EMA for further trend confirmation.

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