Gold Technical Analysis: The Dollar’s Decline Supports Gold

In the near term, and according to the performance on the hourly chart, it appears that the XAU/USD is trading within an ascending channel formation.

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  • At the end of last week's trading, gold futures rose to close a volatile week that saw the Federal Reserve meeting and the US jobs report for October.
  • With the yellow metal trading around the $2,000 level, gold may be looking for a catalyst to flirt with record highs.
  • On Friday, the price of gold XAU/USD jumped towards the resistance level of $2,004 per ounce and is stabilizing around $1,985 per ounce at the time of writing the analysis.
  • In last week's trading, the price of gold suffered a weekly loss of nearly 1% but is approaching gains of 10% since the beginning of the year so far.

The Federal Reserve Wants Softer Labor Conditions

In the same performance, silver prices, the sister commodity to gold, rose above $23 per ounce at the end of the week. As a result, the price of the white metal ended the trading week flat and will remain down by about 4% over the year.

In general, investors have sifted through the latest US non-farm payrolls report, which turned out to be good news for financial markets as it could indicate what the Federal Reserve wants: softer labor conditions. In October, the US economy added a total of 150,000 new jobs, down from 297,000 revised lower in September, according to the Bureau of Labor Statistics (BLS). This came in below the consensus estimate of 180,000.

According to official figures, the unemployment rate in the country rose to a higher-than-expected level of 3.9%, compared to 3.8% in the previous month. Also, Average annual hourly earnings fell to 4.1% and rose by 0.2% on a monthly basis. However, the labor force participation rate fell to 62.7%, average weekly hours worked fell to 34.3, and the under-six unemployment rate rose to 7.2%. Most employment gains were concentrated in government and related sectors. Obviously, health care led the way with 58,000 jobs, followed by government (51,000), construction (23,000), and social assistance (19,000). Finally, Manufacturing lost a total of 35,000 jobs. Overall, economists say this was a moderate report because it was neither too strong nor too weak.

Meanwhile, US stocks posted modest gains after the October jobs report and enjoyed their best trading week in 2023. Meanwhile, Treasury yields fell, with the benchmark 10-year bond yield falling 12.3 basis points to 4.546%. On the other hand, the yield on two-year bonds fell by 8.4 basis points to 4.891%, while the yield on 30-year bonds fell by 10.7 basis points to 4.716%.

Another factor affecting the gold market, the US Dollar Index (DXY), a measure of the US dollar against a basket of other major currencies, fell to 105.33, from opening at 106.12. Accordingly, the DXY dollar index recorded a weekly decline of about 1.1%, reducing its gains since the beginning of the year to less than 2%. Meanwhile, fluctuations in interest rates affect the opportunity cost of holding bullion, which does not generate a return, while a weak US dollar is beneficial for dollar-denominated goods because it makes it cheaper for foreign investors to buy them.

As for other metals markets, copper futures settled at $3.68 per pound. Platinum futures rose to $937.20 an ounce. Palladium futures rose to $1,117.00 per ounce.

Gold price forecast for XAU/USD today

The price of gold has now risen to trade slightly above the 100-hour moving average line. As a result, the price of the yellow metal appears to be approaching overbought levels of the RSI on the 14-hour frame. In the near term, and according to the performance on the hourly chart, it appears that the XAU/USD is trading within an ascending channel formation. However, the MACD indicator over this period also appears to be supporting a slight upward bias as it attempts a bullish crossover. Therefore, the bulls will look to extend the current winning streak towards $1,999 or higher to the $2,007 resistance per ounce. On the other hand, the bears will be looking to pounce on pullbacks at around $1979 or lower at the $1972 per ounce support.

In the long term, and according to the performance on the daily chart, it appears that the price of gold is trading within an ascending channel. However, the daily MACD appears to be starting a bearish crossover indicating a change in market sentiment from bullish to bearish. Therefore, the bears will target profits at around $1,947 or lower at the support of $1,907 per ounce. On the other hand, the bulls will be looking to pounce on extended gains at around $2027 or higher at the $2066 resistance per ounce.

XAU/USD chart

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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.