Technical Analysis

GOLD Price Analysis – Dec 21, 2023

By LonghornFX Technical Analysis
Dec 21, 20234 min

Daily Price Outlook

Gold price (XAU/USD) has maintained its upward trajectory, holding strength around the 2,034 level. However, this positive movement is attributed to dovish expectations from the Federal Reserve (Fed), which have placed USD bulls on the defensive and provided substantial support to the precious metal. Concurrently, a softer risk tone in the market has further bolstered the safe-haven appeal of XAU/USD, particularly in anticipation of upcoming US macro releases.

Moving ahead, the focus is fixed on the upcoming release of the US Core Personal Consumption Expenditure (PCE) Price Index scheduled for Friday. This economic indicator holds significant influence over the Fed's future policy decisions, subsequently shaping the short-term path for this non-yielding commodity. Investors are observing these developments as they navigate the dynamic landscape of gold trading.

Impact of Fed's Policy Outlook on Dollar and Gold Markets

It is worth noting that the sentiment is gaining ground, suggesting that the US central bank is poised to transition from its firm stance early next year. This anticipated shift is anticipated to have a pronounced impact on the US Dollar, with a concurrent positive effect on Gold prices. In the meantime, the ongoing market trends signal an increasing probability of the Federal Reserve implementing interest rate cuts, with expectations leaning towards a potential move around March 2024.

Moreover, the dovish outlook from the Federal Reserve is exerting downward pressure on the yield of the 10-year US government bond, driving it to its lowest point since July. This downturn is leaving US Dollar bulls in a defensive position. Notwithstanding various attempts by several Fed officials to downplay the notion of swift rate cuts, the Conference Board's US Consumer Confidence Index surged to a five-month high in December.

US existing home sales defied expectations by unexpectedly rising by 0.8% in November, breaking a five-month streak of declines. These unexpected positive indicators underscore the complex dynamics influencing the market, introducing additional nuances to the overall economic narrative.

US Stock Market Shift, GDP Figures, and Key Economic Indicators

It's worth noting the sudden shift in US stock markets overnight, favoring the safe-haven precious metal and supporting its rise. Traders are now eagerly awaiting the final US GDP numbers, expected to reveal a 5.2% annualized growth in the third quarter, showcasing the strength of the largest global economy. Thursday's economic schedule includes the release of Weekly Initial Jobless Claims data and the Philly Fed Manufacturing Index during the US session.

However, the spotlight remains on Friday's Core PCE Price Index, a key factor influencing the Fed's future rate decisions and likely to stir up volatility in the markets. Investors are closely monitoring these indicators for insights into the economic landscape and potential market movements.

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

GOLD (XAU/USD) - Technical Analysis

In the recent sessions, Gold's technical picture has presented a nuanced narrative, with the precious metal navigating a delicate balance between bullish momentum and the specter of a bearish reversal. Currently, Gold spot prices (XAU/USD) are trading just above $2,037, marking a slight ascent from the previous day's valuation.

The persistence of buyers is evident, yet their momentum is challenged by a notable resistance near the $2,044 level—a ceiling that has proven resilient on multiple occasions, forming a triple top pattern on the 4-hourly timeframe. This pattern is typically indicative of a potential downturn, suggesting that Gold's upside may be curtailed without significant buying pressure.

The market's ambivalence is further reflected in the Relative Strength Index (RSI), which at a value of 57.91, indicates a market neither overextended in its reach nor retreating in caution. Meanwhile, the positioning above the 50-day Exponential Moving Average (EMA), with a current value of $2,025.774, supports the short-term bullish trend. However, the EMA also underscores the need for vigilance as Gold teeters at this pivotal juncture.

With traders eyeing the immediate resistance point, a decisive break above could invalidate the bearish implications of the triple top and propel prices towards the next resistance levels at $2,065 and potentially $2,088.

Conversely, should the pattern hold, a retest of the immediate support around $2,018 and possibly lower supports could ensue. As the market stands at the crossroads, the anticipation builds for a directional breakout, casting the upcoming sessions in a critical light for those tracking the lustrous metal's trajectory.

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