Technical Analysis

GOLD Price Analysis – Dec 19, 2023

By LonghornFX Technical Analysis
Dec 19, 20234 min

Daily Price Outlook

Gold price (XAU/USD) failed to maintain its previous upward rally and edged lower on Tuesday. However, the reason for its downward trend could be attributed to the combination of factors including bullish US dollar and positive sentiment in global stock markets. It should be noted that the slew of influential Federal Reserve (Fed) officials recently tried to push back against market bets for early interest rate cuts in 2024. This is making the US Dollar stronger and putting pressure on gold.

It's worth noting that the Gold price is currently facing pressure due to a positive sentiment in global stock markets, making it less attractive as a safe-haven asset. However, geopolitical tensions remain a significant concern for the markets. Meanwhile, the fears of a potential economic slowdown, especially in China and the Eurozone, could support gold prices. Traders are also being cautious ahead of a key US inflation report scheduled for Friday.

Looking ahead, traders seems cautious to place any strong position before a key US inflation report scheduled for Friday. This report, known as the Core PCE Price Index, will give insights into the Federal Reserve's future decisions, impacting the demand for the US Dollar and influencing Gold prices.

Fed Officials Resist Rate Cut Expectations, Impacting Gold Prices and USD

As we mentioned above that Chicago Fed President Austan Goolsbee and Cleveland Fed President Loretta Mester are against the idea of lowering interest rates, which is different from what the market expects. Goolsbee is puzzled by how the market reacted to the recent FOMC meeting and wants to make it clear that the central bank is not planning to quickly cut rates. Mester thinks the financial markets might be predicting rate cuts too soon.

New York Fed President John Williams warned against predicting rate cuts too early last Friday, which stopped gold prices from going up too much. However, the market still thinks the Fed will start making things easier in the first half of 2024. This belief is making the US Dollar weaker and helping gold.

As a result, investors are closely watching the US Core PCE Price Index on Friday for insights into the Federal Reserve's upcoming policy decisions, considering the potential impact of these geopolitical factors on the market.

Geopolitical Tensions in the Middle East Boost Safe-Haven Appeal of Precious Metals

In contrast to this, the ongoing worries about conflicts in the Middle East were seen as one of the key factor that cap further losses in the safe-haven precious metal. Yemen's Houthi militants, supported by Iran, attacked with drones and missiles because of what Israel did in Gaza. In reply, the US formed a coalition and started Operation Prosperity Guardian to deal with the Houthi threat in the Red Sea.

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

GOLD (XAU/USD) - Technical Analysis

As of December 19, Gold's market performance illustrates a delicate balance in the investment landscape. The precious metal has seen a slight decrease of 0.25% in 2022, currently positioning itself just below the pivot point of $1,979. Despite this minor dip, the outlook for Gold remains cautiously optimistic.

In terms of resistance, the immediate level is at $2,014, with subsequent ceilings at $2,054 and $2,089. On the support side, Gold finds a cushion at $1,940, followed by lower levels at $1,904 and $1,869. These key price levels play a pivotal role in determining Gold’s short-term movements.

The technical indicators offer a mixed view. The Relative Strength Index (RSI) stands at 50, precisely at the threshold that separates bullish sentiment from bearish. This neutrality in the RSI indicates an evenly balanced market sentiment. The Moving Average Convergence Divergence (MACD) presents a reading of -1.2300 against a signal of 3.8190, suggesting that bearish momentum could be on the horizon, despite the current stable market conditions.

A notable observation is Gold's relationship with the 50-Day Exponential Moving Average (EMA), currently at $2,026.00. Trading below this level, Gold indicates a potential bearish trend in the short term. However, the market remains vigilant for any shifts that could push the metal above this significant moving average.

In conclusion, the overall trend for Gold appears bullish above the $2,015 mark, offering a glimpse of potential upward movement in the coming days. Investors are advised to closely monitor these key technical levels and indicators, as they will play a crucial role in shaping Gold's market trajectory in the near term.

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