Technical Analysis

GOLD Price Analysis – Nov 17, 2023

By LonghornFX Technical Analysis
Nov 17, 20234 min

Daily Price Outlook

During the European trading session, the price of gold (XAU/USD) is maintaining its upward trajectory and consolidating its modest gains. However, this positive movement can be attributed to recent lackluster economic data from the US, notably the subdued figures from the October Consumer Price Index (CPI) and Producer Price Index (PPI).

Therefore, this data is reinforcing the belief that the Federal Reserve has concluded its tightening cycle. As a result, market speculation is growing regarding potential interest rate cuts, possibly in the first half of 2024. This anticipation is consequently keeping the yield on the 10-year US government bond at a low, providing support for the price of gold.

Gold Gains as Dollar Falters Amid Fed's Dovish Tone and Mixed US-China Signals

Furthermore, the broad-based US Dollar is struggling to rebound from its lowest point since September 1, prompted by lackluster consumer inflation figures reported on Tuesday. Despite expectations for a potential recovery, the dollar is hampered by dovish sentiments surrounding the Federal Reserve.

Meanwhile, the mixed signals emerging from high-level US-China talks are also enhancing the appeal of the safe-haven asset, Gold. Investors are currently closely monitoring US housing market data and statements from the Federal Reserve for fresh insights. Despite experiencing a recent dip, Gold (XAU/USD) is poised to conclude the week with gains of almost 2.5%, thereby breaking a two-week losing streak that brought it to its lowest level since October 18 on Monday.

Gold Rebounds on Dovish Fed Signals and Economic Indicators

It's noteworthy that Gold has experienced a rebound of over $50 from its recent low, hovering around $1,932-1,931 on Monday. However, this resurgence is driven by the belief that the Federal Reserve is unlikely to raise interest rates further. The recent US Consumer Price Index (CPI) report revealed a slower-than-expected inflation rate, and Thursday's Jobless Claims suggested a cooling job market. October's CPI remained unchanged, with the yearly rate experiencing its smallest increase in two years, rising to 3.2% from September's 3.7%. The number of initial jobless claims rose to 231K from the revised 218K.

Moreover, the decline in oil prices is anticipated to alleviate inflationary pressures, aligning with the Federal Reserve's 2% target and contributing to a softening of its hawkish stance. Numerous Fed officials have echoed progress in the battle against inflation, hinting at a potential conclusion to tightening policies. Traders are now speculating that US interest rates will remain unchanged, with CME Group's FedWatch Tool indicating an increasing probability of a rate cut by March 2024.

Therefore, the yield on the 10-year US government bond has touched a two-month low, leading to a weakened US Dollar and offering support to Gold.

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

GOLD (XAU/USD) - Technical Analysis

Gold's recent ascent reflects a broader market recalibration as it reaches $1984.67, a modest 0.17% daily uptick. This upward trajectory sees it approaching key resistance levels, with an immediate ceiling at $1971.51 and higher resistance at $2010.866, suggesting a potential test of the $2053.318 mark if the momentum persists. The pivot point for this bull run is firmly planted at $1932.328.

Technical indicators underscore the precious metal's current strength; the Relative Strength Index (RSI) hovers around 57.04, signaling a positive, yet not overextended, market sentiment. The Moving Average Convergence Divergence (MACD) corroborates this bullish trend, though it's essential to monitor for any signs of divergence that may signal a momentum shift.

Support levels are carved out at $1900.489 and $1857.329, providing a buffer against potential pullbacks. The 50-day EMA at $1943.359 adds another layer of support, reinforcing the bullish sentiment.

Chart patterns reveal a consolidation phase, with gold prices trading within a narrowing range, hinting at an impending breakout. The asset’s trajectory above the 50 EMA confirms the market's short-term confidence in gold.

In conclusion, gold's current position above critical technical levels suggests a bullish outlook, with expectations that it may soon challenge upper resistance levels.

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