GOLD Price Analysis – Dec 11, 2023

Daily Price Outlook

Gold price (XAU/USD) failed to stop its downward rally and hit a two-week low on Friday. However, this decline was driven by the release of employment data from the United States, which exceeded expectations. Notably, the highly anticipated US jobs report showed overall strength and indicated a resilient economy.

Consequently, investors adjusted their expectations for a 25 basis points (bps) interest rate cut by the Federal Reserve (Fed) in March 2024. This shift led to an increase in US Treasury bond yields and the US Dollar (USD), exerting downward pressure on the gold price.

Although, the declines in the gold price could be short-lived as the geopolitical risks remain on the table. Meanwhile, traders seem hesitate to place any strong bets ahead of this week's key data and central bank event risks. In the meantime, the US consumer inflation figures are due on Tuesday, which will be followed by the crucial FOMC decision on Wednesday. Moreover, the Swiss National Bank (SNB), the Bank of England (BoE), and the European Central Bank (ECB) are all set to announce policy updates on Thursday.

Upbeat US Job Data Spurs Treasury Yield Rebound and Dollar Strength

It is worth noting that the 10-year US Treasury yield bounced back from a three-month low. This happened because of positive US job data, boosting the US Dollar and putting pressure on Gold prices.

It should be noted that the US Non-Farm Payrolls (NFP) report revealed that the economy added 199,000 new jobs in November, surpassing expectations of 180,000 and exceeding the previous month's 150,000 rise. Meanwhile, the Unemployment Rate also dropped from 3.9% to 3.7%, despite more people entering the job market.

Therefore, this data indicates a strong job market, leading traders to speculate that the Federal Reserve might not cut interest rates until May 2024.

Geopolitical Tensions Boost Gold Prices Amidst Middle East Escalation

Furthermore, US troops faced more attacks from Iran-backed militias in Iraq and Syria due to their support for Israel amid the ongoing conflict in Gaza. Meanwhile, the US embassy in Baghdad was shelled after an earlier rocket attack involving 14 rockets, raising concerns about a potential escalation in the Middle East.

Hence, the heightened geopolitical tensions, marked by attacks on US troops and the embassy, increased uncertainty, prompting investors to seek safe-haven assets like gold, likely leading to a rise in its price.

Looking forward, traders are now keeping a close eye on this week's US consumer inflation data and the Federal Reserve's interest rate projections. However, the upcoming week is also busy with monetary policy meetings from the Swiss National Bank (SNB), the Bank of England (BoE), and the European Central Bank (ECB) scheduled for Thursday.

GOLD (XAU/USD) - Technical Analysis

Gold's market trajectory has recently seen a shift, with prices retracting to a near $1,998 per ounce, indicating a potential easing of the bullish fervor that characterized the previous sessions. The delicate balance of market forces is reflected in the 4-hour chart where the precious metal teeters around a significant threshold, suggesting a state of indecision among traders.

The immediate pivot point stands at $2,000, a psychological barrier that gold prices are struggling to reclaim. Overhead, resistance levels at $2,024.58 and $2,039.12 loom large, signifying potential headwinds that may stall an ascent. Conversely, support levels at $1,967.78 and $1,944.67 present a foundation that could arrest any further decline.

Within this technical framework, the Relative Strength Index (RSI) presents a neutral reading at 50, indicating a market equilibrium where buyer and seller momentum are in a standoff. Compounding this is the Moving Average Convergence Divergence (MACD) which, residing at -3.133, signals a bearish divergence as it trails below the signal line at -8.030, hinting at possible downward price action ahead.

The market's sentiment hinges on the 50-day Exponential Moving Average (EMA) at $2,024.58, which currently acts as a ceiling capping gold's upward movement. A persistent trade below this average could potentially confirm a shift towards a bearish trend.

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