Technical Analysis

GOLD Price Analysis – Dec 05, 2023

By LonghornFX Technical Analysis
Dec 5, 20233 min

Daily Price Outlook

Gold price (XAU/USD) maintained its upward momentum and drew some further bids around the $2,145 mark. Gold regained positive momentum on Tuesday, reversing the previous session's pullback from the all-time peak. However, the reason for its upward trend can be attributed to various factors, including speculation surrounding a potential Federal Reserve rate cut, decreasing US bond yields, a weaker US dollar, and an overall risk-off sentiment in the market.

Market Confidence in Fed Rate Cut Boosts Gold Prices Despite Powell's Cautious Remarks

Despite Federal Reserve Chair Jerome Powell's cautious comments on Friday, the market is inclined to believe that the US central bank is unlikely to raise rates further and may start rate cuts in the first half of the coming year. According to the CME Group's FedWatch Tool, there is a 60% probability of a rate cut by March 2024. This has led to a decline in the US Dollar and contributed to the gains in the gold price.

Fed Chair Jerome Powell, in a speech last Friday, suggested that it is too early to dismiss the possibility of additional rate increases or to initiate discussions about rate cuts. Despite Powell's cautionary remarks, investors remain firm in their belief that the US central bank has concluded its cycle of interest rate hikes and could potentially shift towards policy easing as soon as March 2024.

Traders are currently keeping a close eye on the US ISM Services PMI, expected to climb to 52 in November. However, the main focus is towards Friday's release of the US employment report (NFP), which is expected to offer insights into the job market.

Gold Prices Boosted by Geopolitical Tensions, China Epidemic Worries, and Caixin PMI Data

Another factor contributing to the upward movement in gold prices is the geopolitical tensions and concerns regarding a potential new epidemic in China. These concerns have overshadowed positive developments, including the improved business activity in China's services sector in November. Despite China's Caixin Services PMI surpassing expectations at 51.5, up from October's 50.4, it remains below pre-COVID levels.

Concurrently, the ongoing concerns about a downbeat global economic outlook have prompted investors to seek the safety of gold, a traditional safe-haven asset, leading them to move away from riskier investments.

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

GOLD (XAU/USD) - Technical Analysis

In the latest trading session, Gold (XAU/USD) has showcased a moderate upswing, with the current price nudging to $2038, reflecting a gain of 0.43%. The precious metal continues to oscillate around a pivotal juncture, as indicated by the 4-hour chart where the pivot point stands at $1975.

Technical levels have come into sharp focus with immediate resistance plotted at $2023, succeeded by $2049 and a more significant barrier at $2097. Conversely, immediate support steadies at $1949, with further cushions at $1923 and $1895, which may be tested should a downward trajectory ensue.

The Relative Strength Index (RSI), presently at 47, hovers below the midline, suggesting a neutral to slightly bearish market sentiment. However, the RSI’s position just below the bullish threshold hints at a latent potential for upward momentum should market conditions favor the bulls.

The 50-Day Exponential Moving Average (EMA) currently reads at $2045, further complicating the technical landscape as the price teeters around this crucial trend indicator, suggesting a tussle between bearish and bullish forces.

Chart analysis reveals no clear pattern at the moment, leaving the market's direction open to interpretation based on forthcoming economic indicators or market news that could sway sentiment.

In conclusion, while Gold appears bullish above the $2030 mark, the market awaits a catalyst to confirm this stance. Investors and traders will be watching closely for any moves to test the noted resistance levels in the days ahead, with the $2097 level serving as a litmus test for the metal's capacity to maintain its recent gains.

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