Despite being considered a safe haven, gold has not been immune to Market sentiment shifts to a major risk aversion With market participants selling assets on a massive scale.
Backed by recession fears and Clearing the global pregnancy tradeGold fell more than 1% today, reaching $2,410 an ounce.
The sell-off has been exacerbated by growing concerns that the Federal Reserve’s monetary policy is not adequately supporting the slowing U.S. economy, with market participants turning to bonds as a safer option.
Some analysts believe that gold will rebound again and possibly reach new highs once market fears subside.
Gold is expected to benefit from the current geopolitical tensions and a potential interest rate cut by the Federal Reserve.
- Geopolitical tensions create fear and uncertainty, prompting investors to seek the safety and stability that gold provides.
- Interest rate cuts typically weaken the US dollar, making gold more attractive as a store of value and hedge against currency depreciation.
Fundamentals support further gold price rise, but what about technical factors?
you welcome in Teaching Assistant of the Day (TAOTD)! 👋
Let’s focus on the current technical setup for gold based on the 4-hour chart:
4H gold Chart by TradingView
📈 Technical analysis of the XAU/USD pair on the 4-hour chart
Gold (XAUUSD) The stock market has seen significant volatility in recent weeks, with prices showing both upward and downward movements.
Using the technical analysis concepts we covered in our Forex course, let’s analyze Gold (XAU/USD).
Simple Moving Averages (SMA):
- 10-period simple moving average (orange): It was placed at 2,429. The current price is less This level indicates short-term bearish momentum. down The slope indicates recent weakness.
- 50-period simple moving average price (purple): It was placed at 2,408. The price is volatile Around this level, indicating that Frequency In the medium term.
- 200 period simple moving average (blue): It was placed at 2,381. The current price is above This level indicates a long-term uptrend. The upward slope reinforces the long-term strength.
Relative position of moving averages:
- Moving averages arrangementFrom top to bottom: 10 SMA (orange) > 50 SMA (purple) > 200 SMA (blue).
- bearish alignmentThe 10 SMA is below the 50 SMA while the price is near both of them indicating a potential downtrend in the short to medium term.
- ConvergenceThe moving averages are converging, which may indicate a potential change in trend or a period of consolidation.
Relative Strength Index (14):
- The current RSI reading is 46.54, indicating neutral momentum. This indicates that the market is neither overbought nor oversold, providing no immediate reversal signals.
🕵️ Key Notes
price an act:
- Uptrend and correctionThe price was in an uptrend until late July, marked by higher highs and higher lows. Recently, the price faced a major correction from its peak at around 2,480 and is currently consolidating around the 2,400 level.
- The last dropThe recent dip around 2,360 is a key level to watch for potential support.
- bullish reversal candleThe last candlestick shows a strong green candle, indicating strong buying pressure and a possible reversal in the short term.
Support and resistance levels:
- SupportsThe immediate support level is located at around 2,381 (200-period simple moving average). Recently, the price has bounced off this level, indicating potential short-term support.
- resistanceImmediate resistance is located at $2,429 (10-period SMA) and $2,409 (50-period SMA). Major resistance is located at $2,480 (double top).
Moving averages:
- The 10-period and 50-period simple moving averages are currently acting as resistance levels, while the 200-period simple moving average is providing crucial support.
Market structure, market composition:
- The overall structure remains bullish, but the recent sharp decline indicates increased volatility.
- A break above the recent high at 2,480 would confirm the continuation of the uptrend.
🤔 Possible trade scenarios
He is Gold buy or sell?
The following trading scenarios are provided for educational purposes only. Since they do not include full risk management practices, they are not intended to serve as actual trading recommendations, but rather as food for thought to help you generate your own trading idea.
Long bias:
- Point of ConsiderationConsider entering a long trade if the price finds support near 2,381 (200-period simple moving average) and shows signs of a bounce, such as a bullish candlestick pattern or positive divergence on the RSI. Additionally, a sustained break above the resistance level at 2,408.60 could signal a potential recovery.
- Point of cancellationConsider setting a stop loss below the support level at around 2,360 to manage risk.
- potential targetWe expect a move towards the 2,450 level and above if the uptrend resumes.
- RationaleThe target level of 2,450 is based on the previous resistance level, which may act as an important level for taking profits. If the price manages to break above this level, it will indicate strong buying pressure and the possibility of further rise to a new all-time high (ATH).
short bias:
- Point of ConsiderationConsider entering a sell position if the price fails to hold the support level at 2,381 and shows signs of bearish momentum, such as a strong bearish candlestick pattern or the RSI remains below 40.
- Point of cancellation:Place a stop loss above the recent high at 2,429 to manage risk. This level is crucial as a break above it would invalidate the bearish setup.
- potential targetThe initial target could be the support level at around 2,360. If the downward momentum continues, expect further decline towards 2,320 or lower.
- RationaleTargeting the 2,360 level initially is due to it being a psychological and historical support level. If the price breaks this level, it indicates more selling pressure and the possibility of more significant declines towards the next support level at 2,320.
📝 TAOTD Summary
- directionThe long-term trend appears bullish with price above the 200-period simple moving average, but the short-term and medium-term trends show potential bearish momentum with price below the 10-period and 50-period simple moving averages.
- Main levelsSupport at 2,381 and resistance at 2,429.
- PaidThe RSI is indicating neutral momentum, indicating a short-term bounce could occur if it moves higher.
- Moving average analysisThe downward slope on the 10- and 50-period simple moving averages indicates strong bearish momentum in the short and medium term. The 200-period simple moving average, with its upward slope, indicates crucial long-term support.
While the recent V-shaped recovery suggests strong buying interest, the neutral RSI and recent volatility suggest to caution.
The recent price action suggests a possible bullish reversal in the near term. However, to confirm this, the price would need to break and hold above immediate resistance levels, especially the 10-day SMA and the 50-day SMA.
Watch for follow-through buying in the next few trading sessions to confirm if this is indeed a bullish reversal or a dead bounce.
Remember that this analysis is based only on the technical aspects shown on the chart. In real trading scenarios, it is crucial to consider fundamental factors, broader market conditions, and appropriate risk management techniques.
The gold market can be particularly sensitive to economic and geopolitical events, so these should also be taken into account.