International Journal of Advanced Economics, Volume 6, Issue 12, December 2024
OPEN ACCESS
International Journal of Advanced Economics
P-ISSN: 2707-2134, E-ISSN: 2707-2142
Volume 6, Issue 12, [Link].788-797, December 2024
DOI: 10.51594/ijae.v6i12.1753
Fair East Publishers
Journal Homepage: [Link]/[Link]/ijae
Forecasting gold price using technical analysis indicators
Nguyen Viet Hung1
1
University of Economics and Business,
Vietnam National University, Hanoi, Vietnam
___________________________________________________________________________
Corresponding Author: Nguyen Viet Hung
Corresponding Author Email: viethunghp96@[Link]
Article Received: 15-08-24 Accepted: 30-10-24 Published: 05-12-24
Licensing Details: Author retains the right of this article. The article is distributed under the terms of
the Creative Commons Attribution-Non Commercial 4.0 License
([Link] which permits non-commercial use,
reproduction and distribution of the work without further permission provided the original work is
attributed as specified on the Journal open access page.
___________________________________________________________________________
ABSTRACT
Forecasting gold prices remains a complex challenge due to the volatile macroeconomic
variables, market sentiment, and global events. This study explores the application of
technical analysis indicators, including the Relative Strength Index (RSI), Money Flow Index
(MFI), Commodity Channel Index (CCI), and Moving Average Convergence Divergence
(MACD) in order to predict short-term and long-term gold price movements. By analyzing
these indicators across 1-month and 3-month timeframes on chart, the study provides a dual
perspective on gold's behavior, capturing immediate price fluctuations and broader market
trends. The results reveal that these indicators effectively identify overbought and oversold
conditions, key support and resistance levels, and potential trend reversals. While gold prices
are expected to maintain a bullish trajectory through 2025, the study highlights the possibility
of moderate corrections in the short term. This research contributes to the literature on gold
price forecasting, offering practical insights for investors and financial institutions aiming to
refine their investing strategies in dynamic markets.
Keywords: Gold Prices, Technical Analysis, RSI, MFI, CCI, MACD.
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International Journal of Advanced Economics, Volume 6, Issue 12, December 2024
INTRODUCTION
Gold has consistently been regarded as a valuable asset and a reliable safe-haven during
periods of economic uncertainty, offering stability amid financial turmoil. Its price is
influenced by a complex interaction of macroeconomic factors, such as inflation rates, interest
rates, and currency fluctuations, as well as market sentiment and geopolitical events like wars
or pandemics (Lucey & O’Connor, 2013; Hajek & Novotny, 2022). These factors contribute
to the dynamic and often unpredictable nature of gold price movements, creating a persistent
demand for robust forecasting methods that can aid investors and policymakers.
In financial markets, technical analysis (TA) has become an indispensable tool for
understanding and predicting price trends. By focusing on historical price and volume data,
TA provides critical insights into market dynamics, enabling traders and investors to identify
potential future trends and market reversals. Widely used indicators such as the Relative
Strength Index (RSI), Money Flow Index (MFI), Commodity Channel Index (CCI), and
Moving Average Convergence Divergence (MACD) offer specific advantages in analyzing
short-term volatility, overbought and oversold conditions, and momentum shifts
(Mathiyarasan et al., 2021; Salima & Djunaidya, 2024; Govindasamy et al., 2018).
The applicability of these indicators to gold price forecasting lies in their ability to capture
distinct market behaviors. For instance, the RSI effectively measures price momentum, while
the MFI incorporates volume to evaluate market money flow. The CCI identifies deviations
from average price levels, and the MACD highlights trend reversals by comparing short- and
long-term moving averages. These tools collectively offer a comprehensive framework for
analyzing the intricate movements of gold prices (Phuong, 2021; Maitah et al., 2016).
This study builds upon the existing literature by applying these four indicators across different
time frames to forecast gold prices (XAUUSD) under current market conditions. The research
adopts a dual approach, focusing on a 1-month time frames for short-term trends and a 3-
month time frames for long-term price movements. This methodology addresses the need to
balance rapid market fluctuations with broader, sustained dynamics, thereby ensuring a
holistic understanding of gold price behavior (Xing, 2022; Leigh et al., 2002).
The significance of this research is underscored by the increasing reliance on gold as a hedge
against market uncertainty and inflation. By integrating technical analysis with precise time
frames, the study provides actionable insights for traders and investors aiming to refine their
strategies in an increasingly volatile financial landscape. Moreover, the findings contribute to
the broader academic discourse by offering an empirically grounded evaluation of technical
indicators in the context of gold price forecasting, aligning practical applications with
theoretical advancements in financial analysis.
LITERATURE REVIEW
To begin with, the Efficient Market Hypothesis (EMH) serves as a cornerstone in financial
research. According to this theory, asset prices reflect all available information, requiring
forecasting models to effectively process latent information and random fluctuations to predict
gold price trends accurately (Malkiel, 1989; Degutis & Novickytė, 2014). However, in the
context of high volatility in emerging markets, Leigh et al. (2002) demonstrated that technical
indicators still yield positive results in short-term trend forecasting.
Base on EMH, technical analysis (TA) is a vital approach to analyzing and forecasting gold
price trends on most events. Technical tools such as RSI, MFI, CCI, and MACD have proven
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International Journal of Advanced Economics, Volume 6, Issue 12, December 2024
effective in identifying support and resistance levels as well as overbought and oversold
market conditions (Mathiyarasan et al., 2021; Salima & Djunaidya, 2024; Govindasamy et al.,
2018).
First of all, the Relative Strength Index (RSI) is a crucial technical indicator introduced by J.
Welles Wilder, designed to measure momentum and price change. RSI typically ranges from
0 to 100 and is used to identify overbought (above 70) or oversold (below 30) market
conditions, helping investors determine optimal entry and exit points (Hari & Dewi, 2018;
Ăran-Moroan, 2011; Bhargavi et al., 2017; Xing, 2022). RSI has been successfully applied
not only to stock trading but also to volatile assets such as gold and Bitcoin, enabling
investors to optimize trading strategies, minimize risks, and enhance profitability (Bhargavi et
al., 2017; Xing, 2022). Recent studies have even integrated RSI with computational models
like recurrent neural networks and XGBoost to develop more effective quantitative trading
strategies (Xing, 2022).
Next, the Money Flow Index (MFI), often considered an RSI variation incorporating
transaction volume, plays a critical role in assessing market buying and selling pressure.
Research in Vietnam by Phuong (2021) revealed that MFI significantly impacts stock returns,
particularly at extreme levels below 20 or above 80. This highlights the importance of
investor sentiment, as measured by MFI, in technical analysis and trading strategies (Phuong,
2021; Vijaykumar & Kumar, 2020).
Furthermore, the Commodity Channel Index (CCI) is another essential tool designed to
measure the deviation of an asset's current price from its average price over a specified period.
As an unbounded oscillator, CCI helps investors identify overbought (above +100) or
oversold (below -100) levels. Maitah et al. (2016) validated the effectiveness of CCI in
agricultural commodity markets, demonstrating its strong performance under high market
volatility (Maitah et al., 2016).
Finally, the Moving Average Convergence Divergence (MACD) indicator is a powerful tool
in technical analysis that helps investors identify buy and sell signals by comparing short-term
and long-term moving averages. Research findings indicate that MACD outperforms SMA in
forecasting buy and sell signals in gold markets, especially under high volatility conditions
(Annuar et al., 2021). Leigh et al. (2002) further emphasized that MACD and RSI are among
the most effective indicators for pinpointing price reversal points, particularly in emerging
markets.
TECHNICAL ANALYSIS AND FORECASTING GOLD PRICE IN THE SHORT
TERM AND LONG TERMS.
Utilizing the Relative Strength Index (RSI)
The Relative Strength Index (RSI) remains one of the most widely used indicators for
evaluating momentum and overbought/oversold conditions in financial markets (Rodriguez-
González et al., 2011). For gold prices (XAUUSD), the 1-month RSI (RSI-1M) reveals
notable short-term dynamics. As of October 2024, gold exhibits strong bullish momentum,
reaching $2,666.57, reflecting a continuation of the upward trend established earlier in the
year. RSI-1M has surged to 82.51, crossing the overbought threshold of 70. While this
suggests a potential correction, the lack of bearish divergence implies that the rally may not
yet be exhausted.
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International Journal of Advanced Economics, Volume 6, Issue 12, December 2024
To be more specific, such elevated RSI values precede price consolidations or pullbacks,
which align with market participants taking profits. It is anticipated that any short-term
corrections will stabilize near $2,600 or $2,500, key support levels that reflect gold’s
resilience during heightened macroeconomic uncertainties. Despite potential corrections,
gold’s upward trajectory remains intact, supported by ongoing geopolitical risks and
inflationary concerns.
Figure 1: -Month Timeframe Chart of XAUUSD and RSI-1M
(Source: [Link])
In Figure 1, the 3-month timeframe, the RSI (RSI-3M) strengthens the case for a sustained
bullish trend. At 76.87, it indicates continued buying pressure, with no evidence of immediate
bearish divergence. Historical data suggest that these levels often foreshadow further gains,
potentially propelling gold towards $3,000 by the end of 2025.
This projection is bolstered by gold’s critical role as a hedge against global instability, as well
as the robust accumulation observed in trading volumes.
Figure 2: Month Timeframe Chart of XAUUSD and RSI-3M
(Source: [Link])
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International Journal of Advanced Economics, Volume 6, Issue 12, December 2024
Utilizing the Money Flow Index (MFI)
The Money Flow Index (MFI) provides a complementary perspective by incorporating both
price and volume to assess market conditions. For the short-term analysis (MFI-1M), the
index has reached 81.80, placing it firmly in the overbought zone. This level signifies strong
buying pressure, which is indicative of continued optimism among market participants.
However, historical trends suggest that when the MFI exceeds 80, markets often experience a
short-term consolidation phase.
Gold’s price, currently trading at $2,666.27, may see minor corrections, but these are likely to
be contained within the $2,400–$2,700 range. Despite this, demand for gold as a safe haven
amid global economic uncertainty should sustain its long-term bullish trend.
Figure 3: Month Timeframe Chart of XAUUSD and MFI-1M
(Source: [Link])
On a 3-month timeframe, the MFI (MFI-3M) shows sustained bullish momentum with a
reading of 71.78, though a subtle divergence between price action and MFI may be forming.
This divergence suggests that while gold may continue its upward trajectory into 2025, the
rally could lose momentum as it approaches a peak. Investors should monitor this divergence
closely, as it could signal the start of a more pronounced correction by 2026.
Figure 4: Month Timeframe Chart of XAUUSD and MFI-3M
(Source: [Link])
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International Journal of Advanced Economics, Volume 6, Issue 12, December 2024
Utilizing the Commodity Channel Index (CCI)
The Commodity Channel Index (CCI) excels at identifying deviations from an asset’s average
price, making it a valuable tool for assessing gold’s price momentum. For the 1-month
timeframe, the CCI-1M is currently at 174.21, significantly above the overbought threshold of
+100. This reading indicates strong bullish sentiment and persistent upward pressure on gold
prices. Historical patterns suggest that such extended periods in the overbought zone often
coincide with sustained rallies. Gold is therefore expected to test higher resistance levels,
potentially reaching $2,750–$2,800 in the coming months.
Figure 5: Month Timeframe Chart of XAUUSD and CCI-1M
(Source: [Link])
On a 3-month timeframe, the CCI (CCI-3M) continues to highlight gold’s long-term bullish
trajectory, with a current reading of 124.29. Elevated CCI levels suggest that the price will
likely maintain its upward momentum throughout 2025, supported by geopolitical instability
and inflationary pressures. While minor pullbacks are possible, gold remains well-positioned
to test the $3,000 level by early 2026 before entering a potential consolidation phase.
Figure 6: Month Timeframe Chart of XAUUSD and CCI-3M
(Source: [Link])
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International Journal of Advanced Economics, Volume 6, Issue 12, December 2024
Utilizing the Moving Average Convergence Divergence (MACD)
The Moving Average Convergence Divergence (MACD) is a powerful trend-following
indicator, particularly effective for confirming the strength of ongoing trends. On the 1-month
timeframe, the MACD line remains above the signal line, with the histogram expanding,
reflecting robust short-term bullish momentum. Gold prices, currently at $2,666.40, are likely
to push higher in the short term, with resistance levels around $2,750–$2,800 serving as key
targets.
Figure 7: Month Timeframe Chart of XAUUSD and MACD-1M
(Source: [Link])
In the longer term, the 3-month MACD provides compelling evidence of sustained upward
momentum. The MACD line’s position significantly above the signal line, coupled with the
increasing histogram size, reinforces the expectation of continued growth into 2025 and
potentially 2026. Minor corrections may occur, bringing prices back to the $2,500–$2,700
range temporarily, but the overall bullish trend is expected to remain intact. The psychological
resistance at $3,000 is a plausible target, driven by gold’s enduring role as a safe-haven asset
in volatile economic conditions.
Figure 8: Month Timeframe Chart of XAUUSD and MACD-3M
(Source: [Link])
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International Journal of Advanced Economics, Volume 6, Issue 12, December 2024
DISCUSSION AND RECOMMENDATION
The findings of this study emphasize the importance of utilizing technical analysis indicators
to forecast gold price movements effectively. Indicators such as RSI, MFI, CCI, and MACD
offer valuable insights into different aspects of the market, including momentum, volume-
driven market pressure, deviation from average price, and trend reversals. Each indicator's
distinct characteristics allow for a comprehensive understanding of both short-term
fluctuations and long-term trends.
In the short term, RSI and MFI values suggest that gold prices may experience periods of
overbought conditions, potentially leading to slight corrections. These corrections, however,
are expected to be moderate due to sustained demand for gold as a safe-haven asset. Investors
should monitor these indicators closely to identify potential entry points during pullbacks.
For long-term analysis, the CCI and MACD indicate sustained bullish momentum, supported
by strong macroeconomic fundamentals such as inflationary pressures and geopolitical
instability. While minor corrections may occur, the upward trend is expected to persist
through 2025, with gold potentially testing the $3,000 per ounce threshold. Investors are
advised to adopt a dual approach: capitalizing on short-term price movements using RSI and
MFI while maintaining a long-term perspective using CCI and MACD.
Moreover, the potential divergence observed in certain indicators, such as MFI, suggests that
while the bullish trend is robust, caution is warranted as market dynamics may shift by late
2025 or early 2026. A diversified strategy, combining technical analysis with fundamental
assessments, will be critical for minimizing risks and maximizing returns.
CONCLUSION
This study underscores the utility of technical analysis indicators in forecasting gold prices
across varying time frames. By leveraging RSI, MFI, CCI, and MACD, investors gain a
multifaceted understanding of market behavior, enabling them to navigate both short-term
volatility and long-term trends. The results highlight the complementary nature of these
indicators, as each provides unique insights into market dynamics. While the current trend
suggests continued bullishness, especially in the long term, the findings also caution against
over-reliance on any single indicator. Instead, an integrated approach that adapts to evolving
market conditions will be key to optimizing investment strategies. This research provides
actionable insights for both traders and institutional investors, contributing to a deeper
understanding of gold price forecasting in volatile financial landscapes.
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