Technical Analysis

GOLD Price Analysis – Dec 25, 2023

By LonghornFX Technical Analysis
Dec 25, 20233 min

Daily Price Outlook

Gold price (XAU/USD) has sustained its upward momentum, staying robust above the $2,050 mark. This surge is in response to the US Bureau of Economic Analysis reporting softer-than-expected core Personal Consumption Expenditure (PCE) price index for November. The monthly core PCE index grew slower than anticipated at 0.1%, compared to the expected 0.2%. On an annual basis, inflation slowed to 3.2%, slightly below the consensus of 3.3%.

The Federal Reserve's projection of a 3.2% PCE inflation rate by the end of 2023 has further influenced market sentiment. With the Fed's interest rate at a 22-year high, investors are keenly anticipating potential rate cuts, especially as US inflation eases, driving XAU/USD briefly above $2,070.

Gold Surges Above $2,060 on Softer US Inflation and Rate Cut Anticipation

It's worth noting that the price of gold has surged past the critical $2,060 resistance level following a softer-than-expected US core PCE inflation report. The annual US core PCE data, at 3.2%, aligns with the Fed's projections from its recent Summary of Projections. If the inflation report continues to decline more than expected, it could delay expectations of a prolonged restrictive policy, bringing the possibility of a rate cut into focus.

Investors are now anticipating the Fed's first rate cut in March, followed by another in May. Fed Chairman Jerome Powell's comments on avoiding high interest rates have contributed to these expectations. Despite some policymakers trying to downplay the possibility of rate cuts, the US Dollar faced pressure due to a slight downgrade in the Q3 GDP estimate, indicating potential challenges in the labor market and price stability. Nevertheless, the US economy's resilience stands out compared to other G7 economies.

Therefore, the news of a potential rate cut and economic challenges pressured the US Dollar, boosting gold as a safe-haven asset.

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

GOLD (XAU/USD) - Technical Analysis 

As the market enters the festive period, Gold (XAU/USD) has witnessed a notable uptick, currently trading at $2,053, marking a 0.36% increase. This resurgence reflects a growing appetite among investors for safe-haven assets amidst global economic uncertainties.

The key pivot point for Gold stands at $2,013, with immediate resistance observed at $2,056. Should this bullish momentum continue, we may see the precious metal test subsequent resistance levels at $2,089 and $2,130. Conversely, immediate support lies at $1,979, followed by stronger levels at $1,937 and $1,903, which could serve as buffers against potential retracements.

The Relative Strength Index (RSI) is currently at 60, indicating a bullish sentiment without venturing into overbought territory. This suggests that there is room for upward movement, but caution is warranted as market dynamics can shift rapidly.

Meanwhile, the Moving Average Convergence Divergence (MACD) shows a value of 1.25 with a signal line at 7.55, hinting at possible bullish momentum in the near term. This is further corroborated by the price's position relative to the 50-Day Exponential Moving Average (EMA), which currently stands at $2,051. Being above the 50 EMA underlines a short-term bullish trend for Gold.

A key technical pattern observed is the triple top breakout at $2,045, a bullish signal that could propel Gold towards $2,088 or potentially higher. This breakout indicates a strong buying interest at higher levels, suggesting a consolidation of the bullish trend.

In conclusion, the overall trend for Gold appears bullish, especially if it maintains above the $2,045 threshold. In the short term, we can anticipate Gold to challenge resistance levels, particularly around $2,056 and potentially higher, depending on market sentiments and macroeconomic factors.

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