Gold Technical Analysis: Gold Is a Buy on Every Pullback

Any decline in the price of gold (XAU/USD) will be an opportunity to return to buying.

brokers-we-recommend Forex Brokers We Recommend in Your Region

See full brokers list see-full-broker
  • The gold price tested the resistance level of $2,009 per ounce, the highest level in five months, due to the demand for buying it as a safe haven amid global geopolitical tensions.
  • Consequently, it was natural to activate profit-taking sales that pushed the price of gold (XAU/USD) towards the support level of $1,970 per ounce, stabilizing around the level of $1,986 per ounce at the time of writing the analysis.
  • Therefore, despite the strength of the dollar, gold is still receiving momentum from the demand for buying as a safe haven.

Global Demand for Gold Remains Strong

For decades, gold has remained the best-performing asset class, providing double-digit returns to investors. As expected, demand for gold remains above the long-term average during this quarter as the prices of precious metals continue to move in response to global events. According to the World Gold Council (WGC), gold purchases by global central banks are also continuing at a rapid pace. Meanwhile, the demand for jewelry has fallen slightly due to rising prices, it has been mixed on the investment front.

According to the council's data, demand for the yellow metal, gold, rose by 8% in the third quarter, slightly above its five-year average. However, it declined by 6% year-on-year. Meanwhile, central bank buying rates reached 337 tons, which was the third-strongest buying rate on record, although it was still not as high as the 459 tons seen during the same period of the previous fiscal year. So far, central bank purchases have risen by 14% compared to 2022. Moreover, Total demand also rose by 6% year-on-year. However, exchange-traded gold funds lost 139 tons in the third quarter, which was relatively less than the same period last year. Finally, gold mining produced a record 971 tons in the third quarter, boosting global supply to 1,267 tons. This represents an increase of 6% year-on-year.

Many countries, including India, saw a rise in domestic gold prices, mostly due to the currency's weakness against the US dollar. On Tuesday, the spot price of gold fell 0.2% to $1,992.79 an ounce in early trading. Meanwhile, US gold futures fell 0.2% to US$2,002.10. However, these prices are still very high compared to spot prices on October 6, which averaged $1,809.50. According to a report on cnbctv18.com, bullion prices are still on track to post an 8% rise in October, the highest increase since last November.

Historically, many investors view gold as a crisis commodity. For this reason, prices tend to rise whenever there is a geopolitical conflict or any form of economic downturn. During these times, physical gold and gold-backed securities tend to outperform. Of course, inflation is another major driver.

Currently, global prices continue to move within the “psychological range” of $2,000. This term refers to the range in which psychological state and human behavior tend to influence trading more than other factors. However, some analysts say the chances of gold exceeding the nominal historical high reached in August 2020 remain high as investors await the outcome of the US Federal Reserve's policy expectations.

For beginners, a wide range of factors often affect the costs of gold bars, as well as the prices of other precious metals. These range from geopolitical problems and macroeconomic factors to currency movements and the total cost of mining and refining.

Gold price forecast for XAU/USD today

Despite selling pressure in the middle of this week's trading, the price of gold (XAU/USD) is still on an upward trend if it is near the psychological resistance level of $2,000 per ounce. Recently, it is expected to break through this resistance to test stronger peaks as long as the conflict in the Middle East continues to expand. It seems that it may take more time, and therefore any decline in the price of gold (XAU/USD) will be an opportunity to return to buying. Currently, the closest support levels for gold are $1,958 and $1,940, respectively.

Finally, the gold market will be affected by the level of the US dollar after the announcement of the US Federal Reserve and US employment numbers.

XAU/US chart

Ready to trade today’s Gold prediction? Here’s a list of some of the best XAU/USD brokers to check out.

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.