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Gold Technical Analysis: Gold Benefits From Dollar Weakness

If the US economic data numbers come in better than expectations, the price of gold may stop its progress and be exposed to profit-taking selling operations.

  • Gold futures recorded their biggest gain in a single session in nearly a month, after the US inflation reading came in below expectations in October.
  • Gold prices have fallen this month and are now approaching the $2,000 level again.
  • Yesterday, gold prices jumped to the resistance level of $1,971 per ounce, which is stabilizing around it at the time of writing the analysis.

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    Weak US Data Boost Gold

    This was the best performance of the session since October 18. Gold prices have risen by about 7.5% since the beginning of the year. In the same performance, silver prices, a sister commodity to gold, rose again to above $22 per ounce. Silver prices had reduced some of their declines since the beginning of the year by about 4%.

    According to the economic news, according to the Bureau of Labor Statistics (BLS), the US annual inflation rate fell to 3.2% in October, down from 3.7% in September. This was also below the consensus estimate of 3.3%. The Consumer Price Index (CPI) did not change on a monthly basis. Core inflation, which excludes volatile energy and food components, fell to 4% on an annual basis, down from 4.1%. The Consumer Price Index (CPI) rose 0.2% on a monthly basis.

    Financial markets rose on the back of inflation data, with major indicators rising by about 2%. The performance in stocks and bullish economic data affected US Treasury bonds and the dollar. US Treasury market yields fell across the board. However, in overnight trading, bond yields are recovering some of their losses, with Treasury bills and securities adding up to three basis points to trade at, near or above 5%. Also, Long-term Treasuries remained flat.

    In general, investors are betting that the Federal Reserve has finished raising US interest rates and could start lowering them as early as June 2024. Gold is usually sensitive to interest rate movements because it affects the opportunity cost of holding non-yielding bullion. And another influential factor on the gold market. The US dollar fell but rose strongly during the overnight hours. The US Dollar Index (DXY), a measure of the US dollar against a basket of other major currencies, is back above 104.00. Generally, a weak dollar is good for dollar-denominated goods because it makes it cheaper for foreign investors to buy them.

    As for other metals markets, copper futures were unchanged at $3.68 per pound. Nearby, Platinum futures fell to $891.30 an ounce. Also, Palladium futures fell to $1,024.00 an ounce.

    Gold price forecast for XAU/USD today

    According to the performance on the daily chart below, the price of gold, the price of gold will have an opportunity to move towards the psychological resistance level of $2,000 per ounce again. Especially, if it moves towards the resistance level of $1,985 again, and that may happen today if the US economic data numbers come in less than expectations.

    On the other hand, if the US economic data numbers come in better than expectations, the price of gold may stop its progress and be exposed to profit-taking selling operations. In general, the bears have no control over the trend again without breaking the $1930 support again.

    XAU/USD chart

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    Mahmoud Abdallah
    About 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.

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