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Gold Technical Analysis: Gold Heading Toward Buying Levels

The price of gold XAU/USD is in a downward corrective phase and these movements may be an opportunity to consider buying gold again.

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    • For three consecutive trading sessions, the price of gold XAU/USD has been exposed to profit-taking selling, pushing it towards the support level of 1,948 USD per ounce.
    • Now is stable around it at the time of writing the analysis, rebounding from the resistance level of 2,004 USD per ounce, which gold recorded following the weakening of the US dollar from weaker-than-expected US employment numbers.
    • In general, gold prices have fallen as concerns about market volatility have eased – and it appears that the gold price is entering a corrective move.

    Correction or Period of Consolidation

    Recently, Gold's performance contrasts sharply with the sharp rise that occurred last month when prices broke the 2,000 USD per ounce barrier, supported by concerns about economic instability as the conflict between Israel and Hamas escalated. While concerns about the conflict escalating into a regional war remain, prices have fallen as the US Federal Reserve has sent signals to markets that it is done raising US interest rates. As, the Federal Reserve kept US interest rates at 5.25% to 5.5%, following a tough approach to taming inflation.

    Commenting on the events and the performance of prices, Ole Hansen, a commodity analyst at Saxo Bank, said that the response of Fed Chairman Jerome Powell surprised market watchers, who had identified gold as a major safe haven. The analyst added, "His comments helped the wrong traders who focused during the report week on markets suffering from geopolitical concerns, the sharp rise in Treasury yields and the strength of the dollar which led to the risk of economic weakness. Three weeks of near-record gold accumulation left the metal vulnerable to a correction or better a period of consolidation."

    These expectations were shared by Craig Erlam, chief market analyst at Oanda, who believes that the 2,000 USD per ounce level represents a psychological barrier for investors, as the metal struggles to maintain itself at this important level this year. The analyst added, "Gold has fallen today and looks to be entering a correction phase after failing to break meaningfully above 2,000 USD on a number of occasions. Therefore, we  may be seeing some of the geopolitical risks in the markets recede or just a technical correction in the rise over the past month, but the last two sessions have not been great. Looking to the future, the analyst wanted to see how investors would react if the price of the metal fell to around 1,940 USD because this "coincides roughly with the previous resistance.”

    Gold price forecast for XAU/USD today

    Based on the performance on the daily chart below, the price of gold XAU/USD is in a downward corrective phase. At the same time, with the continuation of global geopolitical tensions, these movements may be an opportunity to consider buying gold again. I believe that the support levels of 1,938, 1,925, and 1,918 USD are the most important to do so, with the expectation of returning to the vicinity of the psychological resistance level of 2,000 USD again. Today, Gold prices will be affected by the level of the US dollar following the announcement of the weekly number of jobless claims and new statements from Fed Chairman Jerome Powell. Finally, this is in addition to the extent of investor risk appetite or not.

    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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