XAU/USD Technical Outlook: Key Levels for Oct 14-18, 2024

Last week, XAU/USD had strong volatility, mostly in response to the announcement of US CPI data. Gold prices initially fell, but rebounded swiftly as inflation fears fuelled demand for safe-haven assets such as gold. This recovery was spurred by worries about stagflation, which occurs when inflation remains even as the economy slows. Core inflation, as measured by the CPI, continues to climb, challenging the economic outlook as the United States' growth slows. As a consequence, gold's value as a hedge against inflation remains high.

Technical Analysis for XAU/USD

Technically, gold has been challenging a critical resistance level at $2,671 over the H4 period. Despite multiple efforts, XAU/USD has failed to break above this level, which is part of a larger sideways trading range spanning $2,605 to $2,671. This consolidation underscores uncertainty, as traders wait for stronger indications from economic data, the US elections, and the Federal Reserve's approaching FOMC meeting in November.

Last Week's Performance

Last week, XAU/USD was stuck between inflation fears and a rising US dollar. The publication of the most recent Non-Farm Payroll (NFP) data adds to the complication. Although the headline NFP figure was high, most of the employment gain was due to temporary government positions established for hurricane recovery. When these positions were eliminated, the underlying labor market statistics revealed weakness, which added to gold's volatility. Investors are concerned about whether inflation will continue to rise and if the Federal Reserve will halt or decrease interest rates at its upcoming meeting.

This Week's Volatility

Looking forward to the week of October 14-18, gold is projected to stay within its current trading range until a breakthrough happens. The $2,671 resistance level remains a critical hurdle, and a successful breach might propel XAU/USD to the psychological $2,700 level. On the downside, failure to hold above $2,605 might result in a further fall, perhaps hitting $2,530.

Economic data releases, such as US retail sales and unemployment claims, may cause more volatility. Geopolitical concerns and variations in Federal Reserve officials' tone toward inflation threats may potentially generate dramatic price fluctuations. Furthermore, the weekly RSI remains overbought, cautioning investors that a correction may still be underway.

Market Outlook

Despite the present uncertainties, gold is in a long-term uptrend, rising from $1,810 to $2,685 in the last year. Investors should be careful of any breaks from the present sideways range. If gold breaks over the $2,671 barrier, it might signify a new bullish trend as traders seek safe-haven assets in the face of inflation and economic worries. In contrast, a persistent slide below $2,605 would signal a deeper downturn toward $2,530.

In summary, traders should pay special attention to the $2,671 and $2,605 levels, as well as impending economic data and central bank comments. These variables may cause big market moves in the following days.

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