Technical Analysis

GOLD Price Analysis – Dec 27, 2023

By LonghornFX Technical Analysis
Dec 27, 20234 min

Daily Price Outlook

Gold (XAU/USD) maintained a bullish stance, holding above $2,065 during the European session on Wednesday. However, the ongoing upward trend can be attributed to geopolitical tensions in the Middle East, contributing to an increased risk-off sentiment and bolstering demand for Gold as a safe-haven asset. Simultaneously, the upward movement in Gold prices is linked to traders considering the potential for rate cuts by the Federal Reserve (Fed).

Furthermore, the WIRP (World Interest Rate Probability) suggests that the market has factored in a 15% probability of a cut on January 31 and has entirely priced in cuts by March 20, anticipating a total of six cuts by the end of 2024. Concurrently, the previously released softer US data has added to the downward pressure on the Greenback and contributed to the gold price gains.

Geopolitical Tensions in the Middle East and Their Impact on Shipping and Investments

Meanwhile, the ongoing tensions in the Middle East are causing people to be more careful with their investments, and many are leaning towards safer options like Gold. Despite concerns, major shipping companies like Maersk and CMA CGM are cautiously resuming operations in the Red Sea. This hints at a gradual return to normalcy, aided by the presence of a multinational task force in the area. Investors are anticipating Hapag-Lloyd's decision on resuming shipments, which is expected on Wednesday.

Furthermore, there are concerns about an Israeli airstrike outside the Syrian capital, Damascus, which resulted in the unfortunate death of a senior adviser in Iran's Revolutionary Guards. This information comes from three security sources and Iranian state media. Meanwhile, there's talk about Iran potentially closing the Gibraltar Strait, but many experts are skeptical about the practicality of such a move. This situation is having an impact on various industries, and people are keeping a close eye on how it unfolds.

Impact of Lower US Treasury Yields and Federal Reserve Caution on the US Dollar Index (DXY)

Besides this, the US Dollar Index (DXY) is currently below 101.50. However. this decline is influenced by lower US Treasury yields, specifically the 2-year and 10-year yields, which are at 4.29% and 3.88%, respectively. Former Dallas Federal Reserve President Robert Kaplan has voiced concern about the central bank's past mistake of being too accommodating.

He believes the Federal Reserve is now trying to be cautious and avoid swinging to the opposite extreme by steering clear of excessive restrictions that could hinder economic growth. In simpler terms, the US dollar is facing challenges, mainly due to lower bond yields and the Federal Reserve's efforts to strike the right balance.

Furthermore, the losses in the US Dollar were further bolstered after the US Bureau of Economic Analysis (BEA) shared softer data for Core Personal Consumption Expenditures (PCE) in November. The yearly Core PCE Inflation grew by 3.2%, missing the expected 3.3% and the previous 3.4%. On a monthly basis, the data stayed consistent at 0.1%, slightly below the expected 0.2%.

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

GOLD (XAU/USD) - Technical Analysis 

As the global financial markets navigate through the final days of the year, Gold maintains a key position in the investment landscape. On December 27, Gold is trading at $2,066.04, marking a slight decrease of 0.09% over the last 24 hours. The precious metal continues to attract attention, with a pivot point established at $2,069. Investors and traders are closely watching resistance levels at $2,088, $2,109, and $2,126, while support levels are currently set at $2,054, $2,040, and $2,019. These thresholds will be critical in determining Gold’s short-term market trajectory.

From a technical analysis perspective, the Relative Strength Index (RSI) for Gold is at 65, indicating a bullish sentiment without crossing into overbought territory. This suggests a strong buying interest in the market. Moreover, Gold's price is comfortably positioned above the 50-Day Exponential Moving Average (EMA) of $2,042, reinforcing a bullish trend in the short term. This positioning above the EMA suggests potential for continued upward momentum.

In terms of chart patterns, the absence of any significant bearish indicators implies stability and potential for growth. The market is poised for potential bullish momentum, as indicated by the current price movements and technical indicators.

In conclusion, the overall trend for Gold appears to be bullish, particularly above the $2,042 mark. Short-term forecasts suggest that Gold may test its resistance levels in the coming days. Investors and traders considering entry into the Gold market might consider a buy stop at 2072, with a take-profit target at 2100 and a stop loss at 2045.

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