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Analysis

Gold Technical Analysis | Rising yields pressured gold

BY Janne Muta

|January 19, 2024

Gold Technical Analysis - Gold traded lower earlier this week as strong US retail sales data strengthened the yields and the dollar. The drop was quickly reversed though as geopolitical tensions provided underlying support for the gold market. Fed rate cut expectations remain another driving force for the gold buys even though the markets might have overestimated how quickly the Fed is willing to cut the rates.

The Fed Funds futures market currently indicates a 55% probability for the first rate cut in March. For the year, traders expect to see six 25 bp rate cuts with the December target rate at 3.75%.

Earlier this week Fed Governor Christopher Waller emphasised a cautious approach to cutting U.S. interest rates, stating the need to ensure sustained low inflation before acting. Despite nearing the Federal Reserve's 2% inflation target,

Waller advocates for methodical rate reductions, balancing risks to maintain employment levels and control inflation. Recent data shows economic stability, but Waller insists on careful policy changes, requiring more data to confirm a sustainable inflation decrease.

Summary of This Gold Technical Analysis Report:

  • If gold broke decisively above this week’s high and move to 2088 could be likely. Alternatively, look for a retest of 1973 support. Moving averages point higher but as long as the yields move higher it’s challenging for gold to stage a significant rally.
  • Moving averages are still pointing higher suggesting a bullish medium-term trend in gold. Gold technical analysis however shows an ongoing correction. Gold is gradually trading lower in a bearish trend channel. The market is now approaching the channel high where the SMA20 is closely aligned with the channel top (currently at 2047.50).
  • The 8h chart reveals another market structure level (2049) close to the descending trend channel top. Also, the SMA50 is relatively near the channel high. This confluence area could provide significant resistance to price advances as traders might take profits and make the market vulnerable to a downward correction. Indicator-based gold technical analysis suggests weakness with the SMA20 below the SMA50 and both moving averages pointing lower.

Read the full gold technical analysis report below.

Gold Technical Analysis

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Weekly Gold Technical Analysis

Last week gold created a bullish rejection giving early indications of further upside potential but the lower weekly reactionary high at 2088 is a risk for the bulls. If XAUUSD can rally decisively above last week's high (2062) a move to 2088 could be likely. Alternatively, a retest of last week's low at 2013 might occur.

Below 2013 the market might trade down to 1980. Indicator-oriented gold technical analysis suggests continued long-term bullishness with the moving averages pointing higher and the fast SMA(20) above the slow SMA(50).

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Daily Gold Technical Analysis

Moving averages are still pointing higher suggesting a bullish medium-term trend in gold. Gold technical analysis however shows an ongoing correction. Gold is gradually trading lower in a bearish trend channel. The market is now approaching the channel high where the SMA20 is closely aligned with the channel top (currently at 2047.50). I

f the market reverses below 2047.50 and continues the downtrend, traders could be targeting the most recent low (2002) in the short term and then possibly the 1973 low on extension. Alternatively, if the market breaks out of the trend channel the measured move target suggests a move to the 2088 high could be likely.

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Intraday Gold Technical Analysis

The 8h chart reveals another market structure level (2049) close to the descending trend channel top. Also, the SMA50 is relatively near the channel high.

This confluence area could provide significant resistance to price advances as traders might take profits and make the market vulnerable to a downward correction. Indicator-based gold technical analysis suggests weakness with the SMA20 below the SMA50 and both moving averages pointing lower.

The Stochastic oscillator is in the overbought zone but the market momentum is still strong so the price could be more likely to rally further today. The nearest support level is at 2002 and could come into play if the market remains in the bear channel.

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65% of clients trading USDJPY are holding long positions, while 35% are holding short positions. Client sentiment data is being provided by TIO Markets Ltd.

Please note that retail client trading sentiment is often said to be a contrarian indicator. This because trade data suggests that private (non-professional) traders, on average, trade against market price trends. You can follow the TIOmarkets client sentiment live on our Forex dashboard.

The next key risk events impacting this market:

  • USD - Prelim UoM Consumer Sentiment
  • USD - Existing Home Sales
  • USD - Prelim UoM Inflation Expectations
  • USD - Richmond Manufacturing Index
  • USD - Flash Manufacturing PMI
  • USD - Flash Services PMI
  • USD - Advance GDP q/q
  • USD - Unemployment Claims
  • USD - Advance GDP Price Index q/q
  • USD - Core Durable Goods Orders m/m
  • USD - Durable Goods Orders m/m
  • USD - New Home Sales
  • USD - Core PCE Price Index m/m
  • USD - Pending Home Sales m/m

Potential Gold Market Moves

If the market reverses below 2047.50 and continues the downtrend, traders could be targeting the most recent low (2002) in the short term and then possibly the 1973 low on extension. Alternatively, if the market breaks out of the trend channel the measured move target suggests a move to the 2088 high could be likely.

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How Would You Trade Gold Today?

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While research has been undertaken to compile the above content, it remains an informational and educational piece only. None of the content provided constitutes any form of investment advice.

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Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.