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Gold Technical Analysis: Reduced Gains Since Start of 2023

Gold futures failed to avoid a weekly loss, as the rising US dollar and rising Treasury bond yields affected the yellow metal. Currently, investors are also preparing for the long-awaited US inflation report this week, which many analysts expect to rise. During last week's trading, the price of gold XAU/USD was exposed to selling operations under the strength of the US dollar with losses towards the support level of $1915 per ounce. At the end of the week's trading it tried to rebound upwards but the gains did not exceed the level of $1930 per ounce and closed trading around the level of $1919 per ounce. The price of gold recorded a weekly loss of 1.2%, reducing its gains since the beginning of 2023 by 6.11%.

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    In the same performance, the prices of silver, which is the sister commodity of gold, remained below the $24 level at the end of the week's trading. The price of the white metal suffered a weekly decrease of 5.6%, to be added to its decline in 2023 by more than 4%.

    The US dollar was the main driver of the recent gold losses. Where the US dollar index (DXY), which measures the performance of the US currency against a basket of other major currencies, rose to 105.08 and the index had a weekly increase of 0.8% and rose by 1.51% from the beginning of the year 2023 to date.

    The rise in the value of the US dollar is bad for goods priced in dollars because it makes their purchase more expensive for foreign investors.

    Another factor affecting the gold market

     U.S. Treasury yields rose mostly on renewed interest rate hike fears, as investors began to worry that the Federal Reserve may raise U.S. interest rates at this month's FOMC meeting. According to the performance, the yield on ten-year bonds has stabilized at 4.26%. The yield on the two-year bonds rose by 3.1 basis points to 4.986%, while the yield on the 30-year bonds decreased by 2.3 basis points to 4.33%.

    Gold is usually sensitive to interest rate movements because it affects the opportunity cost of holding the bullion that does not yield a return.

    This week the US consumer price index for the month of August (CPI) will be released. The current inflation report issued by the Federal Reserve Bank of Cleveland expects the inflation rate to reach 3.8%, driven by a large jump in energy prices.

    For other metals markets, copper futures fell to $3.72 per pound. Platinum futures fell to $894.80 an ounce. Palladium futures fell to $1192.30 an ounce.

    Technical analysis of gold prices:

    • The XAU/USD gold price has now declined to trade at a few levels below the 100 hour moving average.
    • As a result, the price of gold appears to be approaching oversold RSI levels on the 14-hour window.
    • In the near term and according to the performance on the hourly chart, it seems that the gold price has recently completed a downward breakout from the ascending channel formation.
    • It also seems that the MACD index has turned down, which confirms the downward trend.

    Therefore, the bears will look to extend the current decline towards $1912 or lower to $1906 per ounce. On the other hand, the bulls will look to pounce on the highs around $1923 or higher at $1928.

    In the long term and according to the performance on the daily chart, it seems that the XAU/USD gold price is about to complete a double top reversal pattern. It also looks like the daily MACD is about to start a bearish crossover, indicating a change in market sentiment from bullish to bearish. Therefore, the bearish speculators will look to extend the current lows towards $1901 or lower to the $1884 support. On the other hand, the bulls will look to pounce on profits at around $1936 or higher at the $1953 resistance per ounce.

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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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