Technical Analysis

GOLD Price Analysis – Oct 10, 2023

By LonghornFX Technical Analysis
Oct 10, 20234 min
Signal 2023 05 25 122622 002

Daily Price Outlook

Gold price (XAU/USD) prolonged its upward rally and it settled above the $1,800 mark. However, the reason for its upward rally can be attributed to the escalating Israeli-Palestinian conflict. This is because gold is considered a safe investment during uncertain times. Moreover, the ongoing retracement slide in US Treasury bond yields has been playing major role in underpinning the gold price, as investors are reducing bets for further rate hikes by the Federal Reserve. Besides this, the sluggish US Dollar price action is pushing the non-yielding yellow metal higher for the third successive day, to over a one-week high.

It is worth noting that the gold prices have bounced back by more than $50 from a low point last Friday, but they are struggling to gain more ground. This is because Federal Reserve officials made cautious statements, which boosted investor confidence and made the stock market look more appealing. As a result, gold, which is seen as a safe investment, is losing its speed in surging.

Investors are being cautious and waiting for important reports from the US this week, such as the FOMC meeting minutes on Wednesday and the consumer inflation numbers on Thursday. These reports could influence gold's future direction.

Gold Rises Amidst Israeli-Hamas Conflict While Fed Adopts Cautious Stance

On the other side, the ongoing conflict between Israeli forces and Hamas has been pushing up the price of gold, reaching a one-week high on Tuesday. Meanwhile, Federal Reserve officials have been cautious about raising interest rates further. They believe that the recent increase in long-term US Treasury bond yields will help in controlling inflation. Dallas Fed President Lorie Logan expressed optimism about inflation, causing investors to rethink the chances of another rate hike in November.

Fed Vice Chair Philip Jefferson also sounded less aggressive and suggested a careful approach to raising the benchmark federal funds rate. This shift in the Fed's stance has caused US Treasury bond yields to drop further, weakening the US Dollar. This has been good news for gold (XAU/USD).

Market Positivity Amidst Israeli-Hamas Tensions and Upcoming Key Reports

Despite the ongoing tension between Hamas and Israel, the financial markets are in a positive mood. This has reduced the appeal of gold as a safe investment, causing its price gains to slow down. Investors are awaiting the release of the FOMC meeting minutes on Wednesday. Traders are also keeping a close eye on two key reports this week: the US Core Producer Price Index (PPI) on Wednesday and the Consumer Price Index (CPI) on Thursday. These reports will help us understand inflation trends and the state of the US economy.

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

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) saw notable movement on Monday, with the precious metal rising by approximately 1.60%. Today, it remains mostly neutral, with a marginal 0.01% increase. This price action follows concerns related to geopolitical tensions, which have contributed to the recent volatility in gold markets.

In terms of key price levels, the pivot point stands at $1851. Immediate resistance levels include $1869, followed by $1889 and $1904. On the support side, levels to watch are $1830, $1812, and $1792. These price levels represent crucial areas where traders and investors may encounter significant buying or selling pressure.

Looking at technical indicators, the Relative Strength Index (RSI) currently registers at 66. While not in overbought territory, it suggests a relatively bullish sentiment in the market. The 50-Day Exponential Moving Average (50 EMA) is valued at $1848, indicating that the price is currently above this level, which aligns with a short-term bullish trend.

One significant technical observation is the bullish crossover above the 50 EMA (blue line), suggesting a buying trend. This development implies potential bullish momentum in the market, further supported by the current RSI reading.

In conclusion, the overall trend for gold appears to be bullish, particularly as long as the price remains above the 50 EMA at $1848. Traders should closely monitor this key level for potential trading opportunities in the coming days. The short-term forecast suggests the possibility of testing the resistance at $1869 and beyond.

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