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Gold Technical Analysis – October-11-2023

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In this gold market analysis, we delve into both the technical and fundamental aspects of the gold price.

Gold Fundamental Analysis

Reuters – XAUUSD has been on the rise this week, reaching $1,865.35 per troy ounce. This is happening because investors are looking for a safe place to put their money. This is often the case when the economy is uncertain or volatile. The US Dollar, on the other hand, has been weakening. This is partly due to comments made by officials from the Federal Reserve (Fed), the central banking system of the United States. These officials have suggested that there may not be any further tightening of monetary policy.

Two such officials, Fed Vice Chair Philip Jefferson and Dallas Fed President Lorie Logan, spoke at an event hosted by the National Association for Business Economics. They pointed out that higher Treasury yields (the return on investment for US government bonds) can tighten financial conditions. This could reduce the need for additional increases in interest rates.

On Tuesday, another Fed official, Atlanta Federal Reserve President Raphael Bostic, added his voice to the discussion. He suggested that the current policy rate (the interest rate set by the Fed) is restrictive enough to achieve a 2% inflation target. Inflation refers to the rate at which the general level of prices for goods and services is rising. Bostic noted that the impact of this policy is yet to be felt. He also mentioned that while inflation has improved considerably, there’s still a long way to go to reach the target.

In addition to these economic factors, geopolitical tensions in the Middle East have also been influencing financial markets. These tensions have led to increased demand for government bonds, which are seen as a safe investment during uncertain times. This increased demand has resulted in lower yields on these bonds.

To give you some numbers, the yield on a 10-year Treasury note has dropped by 14 basis points (a basis point is one-hundredth of a percentage point) to 4.63%. Similarly, the yield on a 2-year note has fallen by 12 basis points to 4.96%.

Gold Technical Analysis

In our latest gold market analysis, we’ve observed a significant uptick in the price of gold, which has risen to $1,859. This increase was anticipated, following a rebound from the support area at $1,805. Our predictions were based on several key indicators. The RSI (Relative Strength Index) indicator was in the oversold zone, aligning with the stochastic indicator. This alignment suggested a potential rise in the XAUUSD, as we previously mentioned in our gold market analysis.

gold market analysis

Gold Market Analysis – Chart by TradingView

Looking at the gold daily chart, we noticed a bullish engulfing candlestick pattern forming near the $1,805 support. This pattern often signals a market reversal or at least a correction to recent bearish momentum, indicating a potential rise in gold prices.

Gold Market Analysis

Gold Market Analysis

To get a more detailed view of the gold market, we zoomed into the 4H chart. Here, we found that the gold price is currently grappling with a non-linear trendline. Concurrently, the RSI is hovering near level 70, which is close to the overbought zone.

However, every analysis has two sides – prices can either go up or down. In this case, our gold market analysis suggests that the bearish scenario might be stronger. The reason for this is that bulls face a significant barrier at the $1,883 pivot point. If prices rise above this point, the RSI will likely enter into the overbought zone on the 4H chart, making a bearish scenario more plausible.

Gold Market Analysis

Gold Market Analysis – 4H Chart

Based on our gold market analysis, we suggest a sell stop at 1,849, targeting 1,806, with risk at 1,870. The risk/reward ratio for this trade is 1/2, which is considered ideal.

gold market analysis

Remember that while our analysis is based on careful study and understanding of market trends and indicators, it’s always important to do your own research and consider multiple factors before making any trading decisions.

  • 11 October 2023
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