Technical Analysis

GOLD Price Analysis – Dec 26, 2023

By LonghornFX Technical Analysis
Dec 26, 20234 min

Daily Price Outlook

Gold price (XAU/USD) maintained its upward trend and gained some further traction around 2,065 level. However, the reason for its upward trend could be attributed to the ongoing bets for an early rate cut by the Federal Reserve. Meanwhile, the US bond yields and the USD dropped near a five-month low, lending some additional support to the gold price. Moving on, Investors were still digesting data released on Friday that showed U.S. prices fell in November for the first time in more than 3-1/2 years, underscoring the economy's durability.

Federal Reserve's Policy Shift Sparks Surge in Gold Prices Amid Rate Cut Expectations

It's important to note that the Federal Reserve recently shifted its approach to interest rates, bringing relief to gold price. It should be noted that the Fed hinted at the end of rate hikes and the possibility of future cuts. Analysts from Citi highlighted this as a significant move to ease financial conditions. The shift is driven by concerns about a slowing economy and lower core inflation.

Now, the market is predicting a 75% chance of a 25 basis points rate cut in March, compared to just 21% in November. Investors are also factoring in more than 150 basis points of rate cuts next year.

Therefore, the recent shift in the Federal Reserve's stance on interest rates has buoyed gold prices, pushing them to a near three-week high. The anticipation of an early rate cut, with a 75% likelihood in March, has fueled positive sentiment among investors towards gold.

Economic Shift Sparks Expectations of Central Bank Rate Cuts, Boosting Gold Prices

Moreover, a sharp drop in UK inflation in November, hitting its lowest point in over two years, has sparked optimism about the Bank of England possibly lowering interest rates in the first half of 2024. The trend continues in the Eurozone, where recent data indicates softer inflation, raising the possibility of the European Central Bank making rate cuts sooner than expected.

These developments highlight a broader economic shift, with central banks considering measures to stimulate growth amidst concerns about slowing inflation. Investors are closely watching these indicators for insights into the future direction of monetary policy.

Therefore, the decline in UK inflation and softer Eurozone inflation data has fueled expectations of central banks, like the Bank of England and the European Central Bank, considering rate cuts. This has positively impacted gold prices as investors tend to invest in gold amid economic uncertainties.

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

GOLD (XAU/USD) - Technical Analysis 

As the year draws to a close, Gold (XAU/USD) continues to command attention in the financial markets, especially amid evolving global economic conditions. Currently trading at $2,064, Gold has seen a modest increase of 0.54%, maintaining its position as a key asset in the volatile landscape of commodities trading.

The pivotal point for Gold stands at $2,024, serving as a foundation for its current valuation. Resistance levels are staged at $2,047, $2,078, and a more distant $2,101, marking potential ceilings in the asset's upward journey. On the flip side, support levels at $1,991, $1,966, and $1,945 offer critical thresholds that could stabilize any bearish trends.

The Relative Strength Index (RSI) hovers around 67, indicating a strong bullish sentiment without veering into the overbought territory. This suggests room for further upward movement in Gold prices. The Moving Average Convergence Divergence (MACD) stands at 1.55, notably above its signal of 8.60, reinforcing the bullish momentum.

Additionally, Gold's price is presently above its 50-Day Exponential Moving Average (EMA) of $2,055, signaling a short-term bullish trend. This aligns with the general market sentiment, suggesting that Gold's current rally may have more room to grow.

A notable pattern in Gold's chart is the downward trendline extending resistance at $2,070. A decisive break above this level could open the door to new highs, suggesting the potential for a continued bullish trend.

In conclusion, Gold's overall trend remains bearish below the $2,070 mark, with a possible shift to bullish above this threshold. In the short term, the market will closely watch for Gold's interaction with the $2,070 resistance, which could be a determining factor in its trajectory as we head into the new year.

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