GOLD Price Analysis – Jan 04, 2024
Daily Price Outlook
Gold prices (XAU/USD) have sustained their upward trajectory, remaining bullish around the $2,050 level. This surge can be attributed to anticipations of a Federal Reserve rate cut in March, coupled with escalating geopolitical tensions. Following the Federal Reserve's meeting on December 12-13, during which policymakers deliberated on the economy, US bond yields initially experienced an uptick. However, they subsequently receded as officials reached a consensus that inflation was manageable, and they were cautious not to adopt overly stringent measures, fearing potential harm to the economy.
Consequently, in light of this cautious market sentiment, a growing number of investors opted to acquire precious metals such as gold, particularly around the $2,030 mark on Thursday.
However, the markets remain uncertain about the timing of the Federal Reserve's decision to lower interest rates. Richmond Fed President Thomas Barkin remarked on Wednesday that the option of raising interest rates is still on the table. This statement has prompted a slight uptick in US Treasury bond yields, bolstering the US Dollar and restraining the ascent of gold prices.
Despite this, the bets on the Federal Reserve lowering rates in March, coupled with global tensions, are helping gold prices rebound from a one-week low. The December FOMC meeting minutes suggest policymakers think interest rates are likely near their highest point. They see progress in managing inflation but are cautious about keeping rates low longer if needed. The minutes didn't clarify when rate cuts might start in 2024.
Richmond Fed President Thomas Barkin is confident in a smooth economic landing but hasn't ruled out rate hikes. The 10-year US bond yield below 4.0% supports the dollar and limits gold gains. The US manufacturing sector decline is slowing, according to the ISM, but still remains in contraction. The JOLTS report shows a drop in job listings to the lowest since March 2021.
It's important to mention that the chance of rising tensions in the Red Sea and China's economic challenges is boosting the demand for safe-haven assets, such as gold. China's latest official PMI indicates a ongoing drop in manufacturing without any improvement by the end of 2023. Although a private survey suggests a quicker growth in China's factory activity in December, overall business confidence for 2024 remains low.
Impact of Red Sea Tensions and China's Economic Challenges on Gold PricesIt's important to mention that the chance of rising tensions in the Red Sea and China's economic challenges is boosting the demand for safe-haven assets, such as gold. China's latest official PMI indicates a ongoing drop in manufacturing without any improvement by the end of 2023. Although a private survey suggests a quicker growth in China's factory activity in December, overall business confidence for 2024 remains low.Thus, the increased tension in the Red Sea and China's economic difficulties are making more people turn to safe-haven assets, which is positively affecting the price of gold.
GOLD (XAU/USD) - Technical Analysis
Gold is presently navigating near the 50-Day Exponential Moving Average (EMA) of $2,048, which could play a pivotal role in determining its short-term direction. The overall trend appears mixed, with potential for both bullish and bearish movements, depending on how the asset interacts with these key levels and indicators in the coming sessions.
Conversely, support levels are found at $1,992, $1,972, and $2,083, offering potential floors against bearish trends. The Relative Strength Index (RSI) stands at 39, hinting at a bearish sentiment, while the MACD's value at -3.2 against a signal line of -6.0 could indicate possible shifts in momentum.
Gold (XAU/USD) is showing a nuanced technical outlook as it enters Thursday's trading session. The metal's price has seen a modest increase, currently at $2043, reflecting a 0.08% rise. Key resistance levels are identified at $2,032, $2,048, and $2,069, which are crucial for bullish progress.
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