GOLD Price Analysis – Dec 18, 2024
Daily Price Outlook
Gold prices (XAU/USD) are still struggling to break free from their downward trend, lingering around the $2,644 level, with an intraday low of $2,642.
The main reason for this drop seems to be growing expectations that the Federal Reserve will take a more cautious stance on cutting interest rates.
As a result, US Treasury bond yields have strengthened, which boosts the US Dollar (USD) and makes gold less attractive. This is because gold, being a non-yielding asset, tends to lose its appeal when bond yields rise and the dollar strengthens.
Impact of US Economic Data and Fed Expectations on Gold Prices
On the US front, the broad-based US dollar remains strong due to market caution ahead of the Federal Reserve's decision. The CME FedWatch tool shows that markets are almost fully expecting the Fed to cut interest rates by a quarter point in their December meeting.
Traders will also be paying close attention to Fed Chair Jerome Powell’s press conference and the Summary of Economic Projections (dot-plot) after the meeting, which could offer insights into the Fed’s future plans.
On the data front, the US Census Bureau reported a 0.7% increase in retail sales for November, beating the expected 0.5% rise. The Retail Sales Control Group also grew by 0.4%, rebounding from a 0.1% decline previously.
Additionally, the S&P Global Composite PMI for December rose to 56.6 from 54.9, showing stronger economic activity. The Services PMI also improved to 58.5 from 56.1, while the Manufacturing PMI declined slightly to 48.3 from 49.7.
Therefore, the stronger US dollar and mixed economic data, along with expectations of a Fed rate cut, could limit gold's appeal. Higher interest rates and a stronger dollar reduce demand for gold, which doesn't offer yields like bonds or the dollar.
Impact of China’s Economic Outlook and Policy Shifts on Gold Demand
On the other side, China plans to target around 5% economic growth for 2025, the same goal as this year, which is expected to be met. This decision came after a meeting of top Chinese officials at the Central Economic Work Conference.
However, there are concerns about the country's economic performance, as China’s foreign exchange regulator, SAFE, revealed a net outflow of $45.7 billion from China’s capital markets in November.
This was due to a large deficit in cross-border portfolio investments, with $188.9 billion in receipts and $234.6 billion in payments, marking the largest monthly deficit for this category.
In addition, China’s authorities, led by President Xi Jinping, plan to increase the fiscal deficit target for next year, focusing more on boosting consumption to support the economy. This shift in policy comes amid the threat of 10% US tariffs on Chinese exports.
On the data front, China’s retail sales grew by 3.0% year-on-year in November, missing expectations of 4.6%, while industrial production rose by 5.4%, slightly exceeding the 5.3% forecast.
Therefore, China's economic challenges and policy shifts, along with trade tensions, could boost demand for gold as a safe-haven asset.
GOLD (XAU/USD) – Technical Analysis
Gold prices are trading at $2,647.27, up 0.03%, as the market shows tentative upward movement within a bearish framework.
The key pivot point at $2,654.36 serves as a critical juncture for near-term direction. The 50 EMA at $2,667.06 aligns closely with resistance, reinforcing selling pressure at higher levels.
Immediate resistance is noted at $2,672.93, followed by $2,690.55 and $2,704.46 for further upside tests if momentum shifts.
On the downside, gold is supported initially at $2,634.28, with further levels of $2,617.80 and $2,601.58 offering potential targets for bears.
The RSI at 41 signals bearish momentum but remains neutral enough to allow for a brief recovery before resuming downside pressure.
Traders are watching for a break below the pivot point to confirm bearish dominance, with the suggested entry price for short positions at $2,654, targeting $2,634, while keeping a stop loss at $2,666.
Conversely, sustained movement above $2,672.93 could shift sentiment toward buyers. However, the current setup suggests sellers remain in control below the pivot and 50 EMA.
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