Technical Analysis

GOLD Price Analysis – Dec 06, 2023

By LonghornFX Technical Analysis
Dec 6, 20233 min

Daily Price Outlook

Gold price (XAU/USD) has sustained its upward momentum, gaining additional support near $2,020 as the US Dollar continues to losing traction. Despite the overall risk-off mood in the market, the US Dollar is struggling to maintain its strength. Traders are grappling with renewed concerns about the Chinese economy, contributing to the dollar's decline.

Although, the possibility for a more significant rebound in the gold price is hindered by a modest increase in US Treasury bond yields. Market participants are currently factoring in a roughly 60% likelihood of a US Federal Reserve interest rate cut in March, which could cap the upward momentum in the gold market.

Fed Expectations and Economic Indicators: Impact on Gold Prices

It's noteworthy that recent economic developments in the US haven't substantially altered the expectations surrounding the Federal Reserve's stance on interest rates. According to the Institute for Supply Management (ISM), the Services Purchasing Managers' Index (PMI) for November stands at 52.7, showing a slight improvement compared to October's figure of 51.8.

Conversely, the US job market appears somewhat unstable. The JOLTS Job Openings report unveiled a decline to 8.733 million in October, marking the lowest figure in over 2.5 years. This indicates a potential weakening of the job market. Despite these mixed signals, the data hasn't altered expectations regarding the Federal Reserve's outlook, with market sentiments remaining relatively unchanged.

Therefore, the mixed US economic data had a limited impact on gold prices, as uncertainties regarding the job market and the Fed's stance left investors cautious, resulting in relatively stable gold prices.

Moody's China Rating and Gold's Safe-Haven Appeal

Furthermore, Moody’s Investors Service recently changed its outlook on China’s government credit ratings from stable to negative. This move has made investors cautious about riskier assets, leading them to seek refuge in the traditional safe-haven asset like Gold.

Looking ahead, the focus is on the upcoming US ADP Employment Change data set for release on Wednesday. Moreover, Gold prices are poised to be influenced by the prevailing risk sentiment, which in turn affects the US Dollar and US Treasury bond yields.

 GOLD Price Chart – Source: Tradingview
 GOLD Price Chart – Source: Tradingview

GOLD (XAU/USD) - Technical Analysis

Gold's lustrous climb has encountered a pause, consolidating around $2,023—an uptick of 0.21% from the previous session. As traders and investors analyze the charts, the pivot point is firmly placed at $2,023, marking the balance line between bullish hopes and bearish pragmatism.

Resistance levels at $2,048, $2,098, and $2,124 loom overhead, each a potential turning point for Gold’s next move. Should the metal succumb to bearish pressure, supports at $1,975, $1,949, and $1,921 stand ready to catch a falling market.

The technical indicators signal caution: the Relative Strength Index (RSI) sits at a tentative 42, neither overbought nor oversold, yet tilting towards a bearish bias. The 50-Day Exponential Moving Average (EMA) at $2,028 currently overshadows the price, potentially capping upward moves.

In the realm of patterns, there is no clear trend, suggesting a market in contemplation. The implication of this standoff is clear: a break on either side of the $2,030 demarcation could set the tone for the coming days.

In summary, Gold appears to be wrestling with a bearish undertone below the $2,030 level, and the metal's next direction seems hinged on whether it can muster the strength to challenge and hold above this threshold. Traders should brace for potential tests of resistance or support as the market seeks a new equilibrium.

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