Technical Analysis

GOLD Price Analysis – Dec 18, 2023

By LonghornFX Technical Analysis
Dec 18, 20234 min

Daily Price Outlook

Gold price (XAU/USD) prolonged its upward trend and edged higher 2,024 level. However, the reason for its upward rally could be attributed to the US Dollar downtick. It's important to note that the Federal Reserve (Fed) signaled an end to its monetary policy tightening cycle last Wednesday, with the "dot plot" indicating at least three 25 basis points (bps) rate cuts in 2024. Hence, this dovish stance undermined the US Dollar (USD) and contributed to the gains in the gold price.

Furthermore, concerns about geopolitical risks and fears of a deeper economic downturn, particularly in China and the Eurozone, were seen as another key factors that kept the gold price higher.

Federal Reserve Perspectives and Market Anticipation: Insights from Williams and Bostic

It is worth noting that New York Federal Reserve President John Williams recently spoke to CNBC, noting that the idea of cutting interest rates is not something being actively discussed right now. He emphasized that it's too early to speculate about such measures. Williams highlighted the unpredictable nature of economic data and stressed the need for the central bank to be ready to tighten policies if progress on inflation were to slow down.

Atlanta Fed President Raphael Bostic shared a similar view, stating that rate cuts aren't happening soon and could potentially occur in the third quarter of 2024. Despite these cautious statements, the financial markets are already anticipating a potential easing of Federal Reserve policies by the first half of 2024. This anticipation has contributed to the decline of the US Dollar and provided support to Gold prices.

Economic Concerns and Global Tensions Impacts on Gold

Furthermore, the recent flash PMI prints for Germany, released on Friday, revealed a decline in business activity in December. This raises concerns about a potential recession in the largest economy of the Eurozone. On another note, North Korea launched at least one ballistic missile on Monday, following a separate short-range missile launch on Sunday night.

Therefore, the decline in business activity in Germany and geopolitical tensions, such as North Korea's missile launches, contribute to global uncertainties, likely bolstering demand for safe-haven assets like gold.

Shifting to China, their state media, Xinhua, shared a government report stating that the economy is expected to face more favorable conditions and opportunities than challenges in 2024. Despite this, global uncertainties, including geopolitical risks and worries about economic downturns in China and the Eurozone, are boosting the demand for safe-haven assets like precious metals.

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

GOLD (XAU/USD) - Technical Analysis

As we approach the end of the year, Gold's market behavior presents a compelling story. In 2022, Gold has seen an overall uptick of 0.17%, reflecting a cautious optimism among investors. Currently, the pivot point for Gold is set at $1,981, marking a crucial juncture in its price trajectory.

Key resistance levels are identified at $2,015, $2,054, and $2,088, providing clear markers for potential bullish advances. On the flip side, immediate support lies at $1,939, with further support levels at $1,905 and $1,871, which could act as safety nets in case of a downward price movement.

The Relative Strength Index (RSI) for Gold stands at 52, indicating a mildly bullish sentiment. An RSI above 50 typically suggests a bullish market sentiment, albeit with caution as it is not significantly above the midline. The Moving Average Convergence Divergence (MACD) shows a value of -0.64 against a signal of 5.76, suggesting potential downward momentum. This could indicate a short-term bearish trend, warranting close observation.

The 50-Day Exponential Moving Average (EMA) is currently at $2,015, aligning with the first level of resistance. Gold's price action around this EMA is crucial; a sustained position above the 50 EMA could reinforce the bullish sentiment. The recent closure of a Doji candlestick pattern over the 50 EMA suggests a weakening of the downtrend and a potential shift towards buying.

In conclusion, the overall trend for Gold appears to be bullish, particularly if it sustains above the $2,015 mark. The short-term forecast anticipates Gold to test its resistance levels in the coming days. However, given the mixed signals from RSI and MACD, investors should remain vigilant for any shifts in market sentiment or price movements that deviate from this trajectory.

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