Technical Analysis

GOLD Price Analysis – Nov 08, 2023

By LonghornFX Technical Analysis
Nov 8, 20234 min

Daily Price Outlook

Gold (XAU/USD) has not halted its downward trajectory from the past three days, continuing to slide in today’s trading session. Yet, it remains higher than the two-week low it previously set. The dimming allure of gold is largely due to the robust performance of the US dollar, which has dampened investor interest in the precious metal. Market participants are proceeding with vigilance as they anticipate the Federal Reserve's (Fed) announcement on interest rate policies. They are eager to discern if the Fed will implement rate hikes, which could adversely affect gold's value. The outlook for gold will stay in limbo until the Fed provides clear direction.

The US dollar has rallied somewhat from its nadir since September 20, noted on Monday, placing additional downward pressure on gold. Nonetheless, the outlook is not all bleak for the precious metal, as the lukewarm sentiment pervading the equity markets, coupled with worries over China's economic downturn, are mitigating a steeper fall in gold's value. This backdrop introduces a gamble for those speculating on a decline in gold.

Fed's Hesitant Stance and Gold Price Dynamics

It's essential to recognize that various Federal Reserve (FOMC) members have recently expressed a more guarded stance on the health of the US economy, despite acknowledging its robust performance. This has cast doubt on the Fed's imminent interest rate decisions.

All eyes are on Fed Chair Jerome Powell’s statements today and tomorrow, which are expected to shed light on the Fed's likely maneuvers and consequentially impact gold's valuation. Despite the upward push from the US dollar's strength, gold's descent is restrained by the ambiguity surrounding the Fed's rate decision-making process.

Conflicting Views from Fed Authorities on Rate Hikes

Moreover, the Fed has deliberated whether the current fiscal measures might suffice in curbing inflation, sparking speculation that it might pause further rate hikes. Nevertheless, some Fed members have cast uncertainty this week by hinting at possible additional rate increases to achieve the 2% inflation goal.

Minneapolis Fed President Neel Kashkari has pointed to a strong job market, suggesting that the Fed has more work to do. Conversely, Fed Governor Michelle Bowman has indicated that another rate hike might be necessary to deflate inflation to the 2% benchmark.

Chicago Fed President Austan Goolsbee highlighted that inflation trends would be the main guide in the Fed's rate decisions, avoiding any concrete forecasts about upcoming rate changes. Hence, definitive conclusions about the Fed's plans will have to wait until their official decision is announced.

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

GOLD (XAU/USD) - Technical Analysis

As we edge closer to the winter holidays, gold's luster has dimmed slightly in the past 24 hours, slipping to $1,967.63, a marginal decrease of 0.08%. The 4-hour charts whisper caution into the ears of bulls and bears alike, as the precious metal teeters near a critical juncture.

Examining the key price levels, gold is currently hovering below the pivot point of $1,953. To the upside, immediate resistance forms a gilded ceiling at $1,972, with subsequent barriers at $1,990 and $2,011. Should the bears take the reins, immediate support lies at $1,934, with further cushions at $1,916 and $1,898 awaiting any potential decline.

Turning our gaze to the technical indicators, the Relative Strength Index (RSI) is currently at 37, lurking in the shadows of bearish sentiment. This level suggests a market that is neither oversold nor in the throes of bullish fervor, possibly indicating that investors are taking a breath before the next decisive move.

The Moving Average Convergence Divergence (MACD) paints a more nuanced picture, with its value at -1.6340 and the signal at -5.3770. This observation hints at a bearish trend losing its momentum, as the MACD line attempts to bridge the gap with the signal line—a dance that could potentially herald a shift in sentiment.

Our attention then shifts to the 50-Day Exponential Moving Average (EMA), stationed at $1,979. The current price skirting below the 50 EMA signals a short-term bearish trend, suggesting the bulls are yet to build enough strength to push the asset into a definitive upward trajectory.

Chart patterns offer a more granular perspective, revealing a sideways channel breakout. Such a pattern often indicates indecision but, given the current context, it may suggest that gold is seeking a new path, outside the bounds of its recent comfort zone.

In conclusion, the overall trend for gold remains bearish below the $1,975 threshold. Short-term forecasts lean towards a test of resolve at the immediate resistance level of $1,972. Traders might watch for a potential bounce back should the price approach the immediate support level, while a breach above $1,975 could invalidate the bearish sentiment and flip the script in favor of the bulls.

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