Technical Analysis

GOLD Price Analysis – Nov 02, 2023

By LonghornFX Technical Analysis
Nov 2, 20234 min

Daily Price Outlook

Gold (XAU/USD) continued its upward trajectory on Thursday, driven by the decrease in US bond yields and the weakening of the US dollar. However, these developments were fueled by the market's expectations that the Federal Reserve might pause its interest rate hikes, consequently bolstering the demand for gold. Furthermore, this positive movement was further bolstered by geopolitical tensions and apprehensions regarding China's economic situation.

Gold Market Trends in Light of Geopolitical Conflicts and Economic Challenges

Furthermore, the ongoing Israel-Hamas conflict and economic challenges in China are expected to further bolster the value of safe-haven gold. However, the generally positive sentiment in the risk markets is working against gold but it has managed to maintain its position above a one-week low, hovering around the $1,970-1,969 range that it reached the previous day.

The Federal Reserve's Monetary Policy Impact on Gold and Financial Markets

In addition to this, the Federal Reserve has chosen to maintain unchanged interest rates for the second consecutive time. They have indicated that current financial conditions may already be sufficiently tight to manage inflation. Consequently, the market is now expecting rate cuts to commence in June 2024, which has led to a further decline in US Treasury bond yields and a weakening of the US Dollar.

The yield on the two-year US government bonds has reached its lowest level since September 8, while the 10-year Treasury yield has stepped back from the 5% threshold. Additionally, the Federal Reserve has upgraded its outlook on economic activity, acknowledging the unexpected resilience of the US economy, all the while keeping the possibility of another rate hike on the table.

Therefore, the Federal Reserve's choice to maintain unchanged interest rates and foresee rate cuts in 2024 has resulted in reduced US Treasury bond yields, a weakening of the US Dollar, and a boost in support for gold as a safe-haven asset.

Developments in the Israel-Hamas Conflict and Market Focus on Upcoming US NFP Report

Furthermore, Gaza's largest refugee camp has experienced powerful explosions, which the Israeli military claims killed a Hamas commander connected to the October 7 attacks. In response, Bolivia has severed its diplomatic ties with Israel due to civilian casualties resulting from what it perceives as aggressive and disproportionate military actions in Gaza. Israel's Prime Minister has rejected calls for a ceasefire, stating that they would amount to surrendering to terrorism.

Moving on, the market's attention now turns to the upcoming US monthly employment report (NFP) scheduled for Friday, which is expected to provide significant guidance for the precious metal.

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

GOLD (XAU/USD) - Technical Analysis

The fervor surrounding precious metals, especially gold, has been palpable in recent months. The Gold Spot's current price hovers at $1,986.14, a modest uptick observed over the past 24 hours. In the grand tableau of traded assets, Gold's market capitalization remains robust, ensuring its steadfast position among the elite. Delving deeper into its supply data provides an insight into the nuances of market dynamics that influence this asset.

Examining the 4-hour chart offers a granular view of Gold's recent price actions. Key price levels to monitor closely in the coming days include a pivot point at $1,975.85. The immediate resistance stands at $1,991.36, with subsequent resistances at $2,010.36 and $2,031.29, respectively. On the flip side, if bears take control, the immediate support is pinned at $1,963.17, followed by stronger supports at $1,947.14 and a tentative one around $1,930.00.

The narrative of technical indicators paints an intricate picture. The Relative Strength Index (RSI) clocks in at 49.13. Traditionally, an RSI above 70 signals overbought conditions, and anything below 30 is indicative of an oversold territory. Our current value, hovering just below the 50-mark, subtly hints at a bearish sentiment. However, the proximity to the midline warrants caution. Another pivotal indicator, the 50-Day Exponential Moving Average (EMA), stands at $1,978.343. The Gold price positioned above this mark signifies a short-term bullish inclination.

An eagle-eyed observation reveals an ascending channel pattern on the chart. This suggests that the Gold price has been primarily moving within this upward trajectory. The recent brush with the channel's lower boundary and the subsequent resilience hints at a potential bullish drive in the offing.

In conclusion, the overall trend for Gold, at least in the short term, leans bullish. Given the present momentum coupled with corroborative technical indicators, expectations are rife for Gold to challenge the resistance at $2,010.36 soon. Should it breach this, the $2,031.29 mark might be the next focal point. As always, traders should remain on their toes, keeping an ear to the ground for any macroeconomic or geopolitical developments that could jolt the gold markets.

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