Technical Analysis

GOLD Price Analysis – Oct 06, 2023

By LonghornFX Technical Analysis
Oct 6, 20234 min
Signal 2023 05 25 122622 002

Daily Price Outlook

Gold prices (XAU/USD) succeeded to stop its a declining streak and saw some buying interest on Friday. It has ended a nine-day decline that had pushed it to a seven-month low of around $1,813. Although, the small increase in gold prices did not gain much strength because traders are hesitating and waiting. Traders are waiting for the important monthly employment report from the United States (US) scheduled for later on Friday. Therefore, this report will likely have a strong impact on the market, so many traders are staying on the sidelines until they see the numbers.

It's important to note that the Nonfarm Payrolls (NFP) report strongly influences what people believe the Federal Reserve (Fed) will do with interest rates in the future, and this can, in turn, affect the price of Gold. Currently, the Fed is looking to tighten its policies, which means raising interest rates. This makes the US Dollar more appealing to investors. Consequently, the USD received a slight boost following a two-day decline.

In fact, many market participants strongly believe that the Federal Reserve (Fed) will will stick to its plan of raising rates because the US economy has been doing pretty well. If the jobs data in the NFP report shows that more people are working and making more money, it could lead to higher inflation. To combat inflation, the Fed might keep interest rates high for a longer time.

Gold Prices Rise Ahead of Key US Jobs Report

Gold prices increased on Friday after a recent dip, mainly because traders were getting ready for an important report on US jobs. This report, known as the Nonfarm Payrolls (NFP), is expected to say that the US added around 170,000 jobs in September, less than the 187,000 in the previous month. The unemployment rate might also drop from 3.8% to 3.7%.

However, the reason behind the movement in Gold prices is tied to US Treasury bond yields, which have been going up and supporting the US Dollar. This makes Gold less appealing because it's priced in US Dollars.

Surprisingly, the Federal Reserve (Fed), the US central bank, isn't too concerned about rising bond yields. They think it might help them manage inflation, which has been a worry lately. The Fed has hinted they might keep interest rates high, but the market isn't entirely convinced, giving it only a 40% chance of another rate increase this year.

Furthermore, the weekly data on people applying for unemployment benefits showed that although more people did so last week, the job market still looks strong. This could push inflation up and lead to more interest rate increases by the Fed, which would benefit the US Dollar.

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

GOLD(XAU/USD) - Technical Analysis

Today, the Gold (XAU/USD) trading landscape reflects a price point hovering around $1,830 per troy ounce, mirroring global economic fluctuations and sentiments. Within the last day, critical price markers have emerged. The pivot point is established at $1,830, with an immediate resistance observed at $1,842, followed by the next resistance levels at $1,868 and $1,880. Conversely, Gold's immediate price support is identified at $1,816, with deeper support levels situated at $1,797 and $1,786.

Analyzing from a technical perspective, the Relative Strength Index (RSI) for Gold registers at 20, denoting an oversold situation. Typically, an RSI value beneath 30 implies an oversold scenario, indicating the potential for a forthcoming price recovery or shift. Gold's current price, when juxtaposed with the 50-Day Exponential Moving Average (50 EMA) — set at $1,865 — manifests a transient bearish inclination. Nevertheless, any significant move above this EMA might be indicative of a bullish trend's onset.

Chart dynamics provide additional insights. The present RSI underscores an oversold state, alluding to the likelihood of an upward trend reversal. Furthermore, the strong foundational support rooted at $1,816 could act as a beacon for potential buyers, hinting at a budding bullish trajectory. This suggests that maintaining a position above this pivotal support threshold could usher in a bullish tide. Conversely, slipping below this marker might invite selling pressure.

In conclusion, the prevailing direction for Gold appears tentatively positive. If the metal sustains its position above the $1,816 marker, a bullish trend might be on the cards. However, any decline past this point could steer the trend towards bearish territory.

In the near term, considering the alignment of technical metrics and the interplay of resistance-support levels, Gold seems poised to challenge the resistance thresholds of $1,842 and possibly even $1,868 in the forthcoming trading phases.

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