Technical Analysis

GOLD Price Analysis – Nov 16, 2023

By LonghornFX Technical Analysis
Nov 16, 20233 min

Daily Price Outlook

Gold (XAU/USD) maintained its upward trend and hit a new daily high on Thursday in the range of $1,975-1,976, surpassing the levels touched the previous day. However, the reason for its upward rally can be attributed to a heightened demand for safe-haven assets, fueled by a risk-off sentiment in equity markets. Hence, the risk-off sentiment in US equity futures seen as a key catalyst that boost the precious metal price.

Furthermore, the ongoing consensus that the Federal Reserve has ended its interest rate hiking cycle contributed to the positive momentum for gold. The perception that the Fed is no longer pursuing interest rate increases adds an additional layer of support to the non-yielding yellow metal.

US Dollar Rebound and Its Impact on Gold Prices

On the flip side, the broad-based US Dollar is making a comeback after hitting its lowest point since September 1 following weaker US consumer inflation data. However, this recovery will likely put a cap on further gains for gold. It should be noted that US Retail Sales dropped less than expected in October, and with an upward revision of the previous month's strong numbers, it boosted US Treasury bond yields. This, in turn, is supporting the Greenback.

US Economic Indicators and Fed Uncertainty Impacting Gold and Dollar Dynamics

It's worth noting that the US Producer Price Index (PPI) experienced a significant decline, dropping by 0.5% in October. This marks the largest decrease since April 2020. Additionally, the PPI data for September was revised down from a 0.5% increase to 0.4%. These developments follow Tuesday's report, which indicated that consumer inflation is cooling at a faster rate than anticipated. This reinforces the idea that the Federal Reserve won't be raising interest rates further.

On another note, US Retail Sales fell in October, the first drop in seven months, but it was less than expected, and September's data was revised to show strong gains. San Francisco Fed President Mary Daly highlighted the uncertainty about whether the Fed has done enough to bring consumer prices down to the 2% target.

Therefore, the current uncertainty benefits the US Dollar and could limit significant increases in Gold prices. Investors will keep their eyes on updates on the US economy, such as jobless claims, the Philly Fed Manufacturing Index, and Industrial Production.

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

GOLD (XAU/USD) - Technical Analysis

Gold's technical landscape presents a battleground for bulls and bears as the precious metal consolidates at around $1,960, following a pullback from the $1,975 resistance level. The 4-hour chart reveals that gold is hovering just below the Exponential Moving Average (EMA) 50 close of $1,960.281, which could act as an immediate pivot for the session ahead.

Resistance looms overhead at $1,970.790 and $1,980.904, with a significant psychological barrier at the round number of $2,000, presenting potential targets for buyers. Conversely, support forms at $1,958.345, with a further downside cushion at $1,949.176 and a critical floor at $1,941.013, which may stem any bearish tides.

The Relative Strength Index (RSI) at 54.12 suggests a neutral market, with the potential for shifts in momentum. Additionally, the MACD's slight bullish divergence, without crossing the signal line, hints at a cautious optimism. The interplay between these indicators and the 50 EMA will likely guide the short-term trajectory of gold.

In conclusion, the current technical posture of gold indicates a holding pattern as the market digests recent economic data and anticipates further signals from upcoming US jobless claims and central bank speeches. A decisive move above the EMA could rekindle bullish sentiment, while a drop below current support levels may invite further retracement.

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