Technical Analysis

GOLD Price Analysis – Dec 12, 2023

By LonghornFX Technical Analysis
Dec 12, 20234 min

Daily Price Outlook

Gold price (XAU/USD) managed to stop its downward trend and regained some positive traction around the $1,976 level on Tuesday. However, this positive movement was supported by geopolitical risks and a slight decline in the US dollar. Meanwhile, the uncertainty surrounding the timing of potential Fed rate cuts is providing additional boost to the gold price. Hence, the focus will remain glued to the FOMC policy decision, scheduled to be announced on Wednesday.

Fed Policy Impact on USD, Gold, and Investor Sentiment

It's worth noting that investors are awaiting the Federal Reserve's monetary policy statement, particularly the "dot plot," and comments from Fed Chair Jerome Powell. This will impact the US Dollar and play a role in shaping the future of Gold prices.

Despite upbeat US employment figures suggesting delayed interest-rate cuts, a New York Fed survey indicates a decrease in consumer inflation expectations. This has led to hopes that inflation will ease without causing a recession, causing investors to rethink their expectations for a Fed rate cut in March 2024.

However, market participants still anticipate potential rate cuts in early 2024, with a 40% chance in March and almost 75% in May, according to CME Group's FedWatch Tool. This uncertainty supports Gold prices, with attention now turning to the upcoming US consumer inflation data and the FOMC meeting results.

Geopolitical Tensions and Missile Launch by Houthi Rebels in Yemen Propel Gold's Safe-Haven Appeal

Moreover, a US defense official reported on Tuesday that Houthi rebels in Yemen, backed by Iran, fired a land-based cruise missile. This development is seen as giving a boost to the safe-haven appeal of Gold. Therefore, the ongoing geopolitical tensions further contribute to Gold's safe-haven status, sustaining a modest upward movement in its price throughout the day.

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

GOLD (XAU/USD) - Technical Analysis

In the recent analysis of the Gold market as of December 12, the asset displays a modest upward trend, with its price currently at $1,986, reflecting a 0.2% increase over the past 24 hours. This subtle yet notable movement points to a potential shift in market sentiment, as observed in the 4-hour chart timeframe. The immediate resistance for Gold is identified at $1,897, a crucial juncture for bulls to overcome to sustain the upward momentum. Further resistance levels are marked at $1,953 and $2,051, each representing significant hurdles for a bullish continuation.

On the support side, the immediate level is observed at $2,105, providing a safety net against any potential bearish reversal. The subsequent support levels at $1,796 and $1,694 will play pivotal roles in underpinning Gold’s value in the event of a downturn. These levels are crucial for traders to monitor, as they will likely influence the asset's short-term trajectory.

From a technical standpoint, the Relative Strength Index (RSI) stands at 33, indicating that Gold is nearing oversold territory. This suggests a possible inflection point where the market may witness a reversal, especially if this trend persists. The Moving Average Convergence Divergence (MACD) values, with a MACD line at -2.841 and a signal line at -13.005, hint at a weakening bearish momentum. This could potentially pave the way for a bullish reversal in the near future. Moreover, the current value of the 50-Day Exponential Moving Average (EMA) at $1,991, being below Gold's price, signifies a short-term bearish trend, but also indicates room for an upward correction.

The observed chart patterns, particularly the formation of Doji candles around the $1,976 support level, suggest chances of a bullish correction. This pattern implies that maintaining above this support level could signal the beginning of a bullish reversal for Gold.

In conclusion, the overall trend for Gold appears bullish, especially if it sustains above the critical $1,975 level. Looking forward, the asset is likely to test higher resistance levels, particularly if it remains above this key support.

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