Technical Analysis

GOLD Price Analysis – Dec 22, 2023

By LonghornFX Technical Analysis
Dec 22, 20234 min

Daily Price Outlook

Gold price (XAU/USD) maintained its upward trend and surged to a near three-week high around above the $2,050 level. However, the reason for its upward trend could be attributed to the ongoing bets for an early rate cut by the Federal Reserve, which typically leads to a decrease in the value of the U.S. dollar, making gold more attractive to investors as a hedge against inflation, thereby positively affecting gold prices. It should be noted that the US bond yields and the USD hit near a multi-month low, providing extra support to the gold price.

Looking forward, investors are unsure when the US central bank will cut interest rates in 2024. So, the focus is on the US Core Personal Consumption Expenditure (PCE) Price Index, influencing the Fed's decisions and impacting gold prices. Despite uncertainties, XAU/USD appears set for a second consecutive weekly gain.

Gold Prices Surge on Anticipated Fed Policy Shift and Global Rate-Cutting Trends

It is worth noting that the gold prices reached their highest since December 4 due to expectations of a change in the Federal Reserve's policy. Despite Fed officials pushing back on quick rate cuts, investors remain unconvinced. Notably, the CME Group's FedWatch Tool suggests a higher chance of a rate cut by March 2024, with 150 bps of cuts by year-end. Economic data shows a 4.9% growth in the US economy in Q3, slightly below the previous 5.2% estimate. Jobless claims rose but remain historically low. With low Treasury bond yields and a weaker dollar, a global rate-cutting trend could favor gold and bullish traders.

Therefore, this news suggests a positive impact on gold prices, driven by expectations of Fed policy changes, economic data, and global rate-cutting trends favoring bullish sentiments in the gold market.

Prospect of Bank of England and ECB Rate Cuts Boost Gold Prices Amid Economic Uncertainties

Furthermore, the major drop in UK inflation in November, the lowest in over two years, sparks hopes for Bank of England rate cuts in early 2024. Similarly, soft inflation data from the Eurozone hints at potential earlier rate cuts by the European Central Bank. Therefore, the prospect of rate cuts by the Bank of England and the European Central Bank could positively influence gold prices amid economic uncertainties.

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

GOLD (XAU/USD) - Technical Analysis 

Gold's market presence on December 22 showcases a slight uptick, with prices climbing by 0.23% to reach $2,050. This upward movement positions gold near its pivot point at $1,980, confronting immediate resistance at $2,012, followed by higher challenges at $2,054 and $2,091. On the flip side, support levels are identified at $1,940, $1,905, and $1,871, which could play a crucial role in gold's price direction.

From a technical standpoint, the Relative Strength Index (RSI) currently hovers at 67. This figure, while below the overbought threshold of 70, suggests that gold is experiencing a bullish sentiment without veering into extreme territory. The Moving Average Convergence Divergence (MACD) stands at 0.82 against a signal of 5.65, further implying potential upward momentum.

Moreover, gold's price trajectory is above the 50-Day Exponential Moving Average (EMA) of $2,042, underscoring a short-term bullish trend. The chart analysis reveals a downward trendline breakout at the $2,044 mark, coupled with a triple top pattern breakout at the same level. These technical indicators collectively signal a strengthening bullish trend for gold.

In light of these observations, the overall outlook for gold remains bullish, especially if it sustains above the $2,045 threshold. In the short term, market participants can expect gold to test its immediate resistance levels. A successful breach of these barriers could pave the way for further gains, while a failure to do so may result in a pullback towards the lower support levels. Investors and traders should keep a close watch on these key levels for cues on gold's short-term directional bias.

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