Technical Analysis

GOLD Price Analysis – Oct 13, 2023

By LonghornFX Technical Analysis
Oct 13, 20234 min
Signal 2023 05 25 122622 002

Daily Price Outlook

Gold price (XAU/USD) prolonged its upward rally and gained some further traction around above 1,886 level. However, the reason for its upward trend can be attributed to the decline in the value of the U.S. dollar, which was being pressured by the release of strong U.S. consumer price data, which has raised concerns that the Federal Reserve may need to raise interest rates further in order to combat inflation and bring it closer to its target of 2%.

Furthermore, the ongoing global uncertainties and issues have prompted investors to seek refuge in safe-haven assets like gold. Gold is considered a reliable and secure investment during times of uncertainty. Consequently, gold prices are on the rise today, particularly during the early part of the European trading session.

As we all are well aware that the most significant development in global markets right now has been the release of consumer inflation data from the United States (US). These figures showed a higher-than-expected increase in inflation for the month of September, which has bolstered expectations of additional tightening measures by the Federal Reserve (the Fed). This outcome resulted in a notable overnight surge in US Treasury bond yields and sparked a substantial short-covering rally for the US Dollar (USD). This rally in the US Dollar was viewed as a major factor putting downward pressure on precious metals, including gold.

Gold Prices Stabilize Amid Economic Uncertainty

It is important to note that the price of gold paused its recent drop, mainly due to falling US Treasury bond yields and a weaker US Dollar. The uncertainty about the Federal Reserve's future monetary policy, driven by comments from its officials, remains. Notably, the recent US consumer inflation data showed a 0.4% increase in September, keeping the yearly rate at 3.7%, slightly above expectations, the Core CPI, which excludes food and energy prices, met expectations but dipped to a 4.1% yearly rate in September.

Despite inflation staying above the Federal Reserve's 2% target, there is still a possibility of additional interest rate hikes to manage and control it. Boston Fed President Susan Collins has hinted at the potential necessity for such moves. Furthermore, the ongoing tensions between Israel and Hamas are contributing to the demand for safe-haven assets like gold.

Looking ahead, market watchers are focusing on the Preliminary Michigan US Consumer Confidence Index, which includes 5-10-year inflation expectations that have slightly decreased since May. Additionally, a speech by Philadelphia Fed President Patrick Harker and US bond yields will impact the US dollar's movement, creating short-term trading chances for gold prices as the week ends.

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

GOLD (XAU/USD) - Technical Analysis

As of October 13, Gold is exhibiting intriguing dynamics on the technical front. Currently priced at $1877, it has experienced a 0.48% uptick within a 24-hour window. Analyzing a 4-hour chart timeframe, pivotal price markers have come to the fore.

A pivot point stands established at $1869. On the resistance spectrum, the initial resistance resides at $1881, followed by subsequent resistances at $1901 and $1916. Conversely, immediate support is delineated at $1854, with ensuing support levels at $1835 and $1820. Diving into technical indicators, the Relative Strength Index (RSI) is noted at 64, alluding to a bullish sentiment, given it's greater than 50.

The 50-Day Exponential Moving Average (50 EMA) further consolidates this sentiment, priced at $1860 and indicating that Gold's price trajectory is above this average, suggesting a short-term bullish trend. The chart also reveals a Triple Top Pattern that might hinder upside momentum around the $1880 mark.

However, the 50 EMA's positioning suggests potential buying opportunities.

On the fundamental front, US inflation data for September 2023 remains unaltered at 3.7%, surpassing the anticipated 3.6%. This steady rate is attributed to a subdued drop in energy prices, primarily as fuel prices make a comeback.

Given these parameters, a bullish overtone is sensed: a breakout above $1880 could stimulate further buying. (edited)

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