Technical Analysis

GOLD Price Analysis – Dec 14, 2023

By LonghornFX Technical Analysis
Dec 14, 20233 min

Daily Price Outlook

Gold (XAU/USD) has maintained its upward momentum, holding firm around the $1,973 level. However, this upward trend is attributed to a weakening US dollar, providing strong support to the precious metal. Concurrently, a ongoing risk-on sentiment acts as a significant headwind for the safe-haven asset. The Federal Reserve's dovish shift, coupled with geopolitical risks and apprehensions about an economic slowdown in China, contribute to a favorable environment for bullish traders, enhancing the prospects for further appreciation in the commodity.

Recent Developments in Financial Markets and Central Bank Policies

It's worth noting that the Federal Reserve recently signaled a pause in raising interest rates, suggesting three potential rate cuts in 2024. This move, coupled with expectations of inflation nearing the Fed's 2% target without a recession, caused a significant drop in US Treasury bond yields.

Consequently, the US Dollar faced heavy selling, providing ongoing support for the non-yielding Gold price.

The Fed chose to keep interest rates steady for the third consecutive meeting, adopting a more cautious stance. They expect inflation to approach the 2% target without a recession, with the fed funds rate peaking at 4.6% in 2024, down from the previous estimate of 5.1%. Recent data also showed a slowdown in the rise of business prices.

Market expectations now lean towards a 60% chance of a rate cut in March, and the benchmark 10-year US government bond yield hit its lowest since August. While the post-FOMC US Dollar decline supports Gold, a risk-on environment tempers further gains ahead of central bank announcements on Thursday.

Central Bank Policy Announcements and US Retail Sales Data

Furthermore, the Swiss National Bank (SNB), Bank of England (BoE), and European Central Bank (ECB) are set to announce their policy decisions, potentially adding some market excitement. Traders will also be keeping an eye on US Retail Sales data, with estimates suggesting a second consecutive monthly drop of 0.1% in November.

Looking ahead, the monetary policy updates from SNB, BoE, and ECB could shake up the markets and set the tone before the release of US Retail Sales figures. It's a day full of key announcements that could influence trading dynamics.

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

GOLD (XAU/USD) - Technical Analysis

Gold, historically a haven for investors in turbulent times, has recently shown a technical resistance formation, characterized by a double top pattern extending at $2,039. This pattern is indicative of a potential pause in the ascent of gold prices, suggesting that the market could be contemplating the next move. The precious metal's price, currently navigating around $2,031.35, reflects a modest intraday gain, yet the metal faces a formidable barrier at this double top threshold.

The previous uptrend line that had been a consistent support for gold prices has been breached, and this line is now acting as a resistance. This shift implies that the path towards $2,040 may be fraught with challenges, as the market retests the newfound resistance. The 50-day Exponential Moving Average (EMA), situated at $2,008.69, provides a backdrop for the price action, offering a short-term bullish sentiment as current prices remain above this level.

Technical indicators further reveal the Relative Strength Index (RSI) standing at 67.06, edging towards overbought territory but still reflecting bullish momentum as it remains above the key mid-point of 50.

The overall trend for gold currently exhibits a bullish sentiment, yet the presence of a double top pattern suggests caution as prices approach the $2,039 resistance level. Short-term forecasts indicate that gold will test this resistance, with a decisive breakout or rejection at this level likely to set the tone for future price action. Investors will closely monitor these technical levels to gauge whether gold can sustain its bull run or if a correction is imminent.

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