Gold Technical Analysis: Gold Resists US Dollar Gains

At the beginning of this week's trading, gold futures rose, with attention focused on the Federal Open Market Committee (FOMC) meeting for the month of September. The price of the yellow metal had faced difficulties in breaking through, but investors rejoiced when gold prices exceeded the $1950 level. Since yesterday, the price of gold XAU/USD is stabilizing around the level of $1933 per ounce, recovering from last week's losses, which exceeded the support level of $1901 per ounce.

Until now, the price of the yellow metal has achieved a weekly gain of 0.4%, in addition to its annual increase since the beginning of 2023, which amounted to about 7%. In the same performance, the prices of silver, which is the sister commodity of gold, rose above the level of 23 dollars per ounce. The price of the white metal jumped 0.5% last week but is still down about 3% year-to-date.

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The XAU/USD gold price is trending sideways this month as global financial markets prepare for the Federal Reserve Board's decision on US interest rates. Despite accelerating inflation, the Fed is widely expected to leave the federal funds rate unchanged at a range of 5.25% and 5.5%. But analysts say the real test will come in November. And with rising crude oil prices expected to boost the Consumer Price Index (CPI) and the Producer Price Index (PPI) in September and possibly October, the Federal Reserve may believe it is justified to raise interest rates by a quarter of a percentage point.

On the other hand, the yields of the US Treasury bond market were mixed. where the yield on ten-year bonds will decrease one basis point to 4.315%. The two-year bond yield rose 3.1 basis points to 5.064%, while the 30-year bond yield fell two basis points to 4.392%. As is known, the movement of interest rates affects gold because it can affect the opportunity cost of holding the bullion that does not yield a return.

Until then, there will be a lot of focus on the press conference that US Federal Reserve Chairman Jerome Powell will hold after the FOMC meeting. Meanwhile, it was quiet on the data front, with the September-only NAHB Housing Market Index released and falling from 50 to 45.

Another factor affecting the gold market is that the US dollar index (DXY), which is a measure of the US currency against a basket of other major currencies, fell to 105.14, and the weaker dollar is considered beneficial for goods priced in dollars because it makes buying them cheaper for foreign investors.

For other metals markets, copper futures fell to $3.7765 per pound. Platinum futures rose to $938.0 an ounce. And palladium futures fell to $1248.50 per ounce.

Gold price expectations today:

  • Currently the price of gold XAU/USD is in the stage of breaking the general downward trend.
  • In case of failure to break through the resistance $1940 per ounce, the head and shoulders may be formed on the daily chart below.
  • This strengthens the position of the bears to return and move towards the support levels of $1920 and $1900 respectively.
  • This will depend on the possibility of the US dollar getting a positive boost from the US central bank's policy announcement this week.

On the contrary, if the dollar is weak, the bulls may find the opportunity to make stronger gains. The closest ones will be 1945 and 1960 dollars, and the latter level is important to expect a change in the general upward trend.

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Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.