GOLD Price Analysis – Dec 20, 2024
Daily Price Outlook
Despite the Federal Reserve's hawkish stance, gold (XAU/USD) has managed to maintain its upward momentum, holding steady around the 2,605 level and even reaching an intra-day high of 2,607.
This bullish trend can largely be attributed to a slight dip in the US dollar, which lost some ground due to a modest pullback in US Treasury bond yields.
Meanwhile, the Fed's signals that it plans to slow the pace of interest rate cuts in 2025 are likely to provide support for US bond yields and the dollar. Additionally, the prevailing risk-off sentiment has kept gold in demand as a safe-haven asset, further boosting its price.
Looking ahead, traders seem cautious to place strong positions ahead of the US Personal Consumption Expenditure (PCE) Price Index release.
This key inflation report will impact USD price and could create short-term opportunities in the gold.
Impact of Fed's Hawkish Stance and Economic Uncertainties on Gold
On the US front, the broad-based US dollar has been holding onto its weekly gains, reaching a two-year high.
This is largely due to the Federal Reserve's hawkish signal that it plans to slow the pace of interest rate cuts in 2025, which is supporting the USD. However, this is acting as a headwind for gold.
At the same time, investors are feeling uncertain due to ongoing geopolitical risks, fears of a trade war, and the threat of a US government shutdown.
This is putting pressure on the stock market and driving more demand for safe-haven assets like gold. Traders are also cautious ahead of the release of the US Personal Consumption Expenditure (PCE) Price Index, the Fed's preferred measure of inflation.
In addition, the US Treasury bond yields have pulled back from a multi-month high, limiting the USD’s rally.
Positive economic data, like the 3.1% annual GDP growth for the third quarter and a drop in jobless claims, are backing the Fed's stance.
These developments suggest that the Fed will continue with its hawkish approach, which supports the US dollar and bond yields.
However, this outlook also keeps pressure on gold, as the precious metal offers no yield. Gold traders are waiting for further clues from the PCE data before making significant moves.
Therefore, the US dollar's strength, driven by the Fed's hawkish stance and rising bond yields, is limiting gold's upward movement.
In the meantime, the ongoing geopolitical risks and economic uncertainties are supporting gold's safe-haven demand, but traders remain cautious ahead of key inflation data.
GOLD (XAU/USD) – Technical Analysis
Gold (XAU/USD) is trading at $2,604.19, up 0.37% on the day, as the metal consolidates above the $2,596.10 pivot point. Despite the modest gains, gold faces immediate resistance at $2,626.76, with further hurdles at $2,640.36.
A sustained break above these levels could open the door for bullish momentum, targeting new highs in the near term. On the downside, immediate support is seen at $2,583.95, followed by stronger levels at $2,568.47 and $2,555.24.
Technical indicators present a mixed picture. The RSI is neutral at 50, suggesting that gold is neither overbought nor oversold.
However, the 50 EMA at $2,615.16 indicates near-term bearish pressure, as the price remains below this key moving average. To regain bullish momentum, gold must clear the $2,613 pivot point and stay above the 50 EMA.
The current setup suggests a cautious trading strategy. Traders may look to buy near $2,596 with a stop-loss at $2,584 and a take-profit target of $2,613. A break above $2,626 could justify higher targets, while failure to hold $2,583 may lead to sharper declines.
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