Technical Analysis

GOLD Price Analysis – Nov 29, 2023

By LonghornFX Technical Analysis
Nov 29, 20234 min

Daily Price Outlook

Gold price (XAU/USD) maintained its previous six day winning streak and reached a multi-month peak around the $2,052 level during the Asian session. However, the reason for its upward rally could be attributed to the dovish Fed expectations, falling US bond yields and a bearish USD, which persistently provide support to the gold price.

It's worth noting that investors currently believe the Federal Reserve won't raise interest rates. However, the market predicts around an 85 basis points decrease in interest rates by December 2024, as shown by Fed funds futures. This, coupled with a disappointing US bond auction, has caused a drop in US Treasury bond yields.

Specifically, the yield on the 10-year US government bond is now at 4.274%, its lowest since mid-September. Consequently, the US dollar is at its weakest since August 11, prompting increased demand for gold..

US Dollar Declines as Rate Cut Expectations Grow Amidst Differing Fed Views

The broad-based US dollar failed to stop its downward trend and remained at its lowest in over three months due to growing expectations of several interest rate cuts by the Federal Reserve in 2024, boosting the appeal of gold. Fed Governor Christopher Waller hinted at possible rate cuts if inflation eases in the coming months, expressing confidence in the current policy to stabilize the economy and reach the 2% inflation target.

However, Fed Governor Michelle Bowman holds a different view, emphasizing the potential need for more rate hikes to address persistent inflation. The market expects the Fed to maintain its key lending rate in December, but officials remain watchful of inflation.

Ceasefire Extension Impact on Gold and Focus on US Economic Reports

Furthermore, the ceasefire agreement between Israel and Hamas has been extended by two days, reducing the appeal of safe-haven assets. As per the original deal, Hamas has already released 50 hostages, and an additional 20 are set to be released in the next two days. In return, Israel is releasing Palestinian prisoners. This positive development was seen as a key factor that could limit gains in the gold market.

Moving forward, traders are focused on the upcoming preliminary US GDP report. Afterward, market attention will shift to the US Core PCE Price Index on Thursday.

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

GOLD (XAU/USD) - Technical Analysis

The gold market presents a shimmering technical outlook as the precious metal trades robustly at $2,045.29, up 0.16%. Maintaining its ascent within a well-established upward channel on the 4-hour chart, gold reflects a bullish sentiment that has solidified over the past week.

Key price levels to watch are the pivot point at $2,030.33 and immediate resistance near the Fibonacci extension level at $2,057.05, which could serve as the next battleground for bulls. A succession of resistances lies ahead, with the potential to test $2,069.82 if upward momentum persists.

Technical indicators offer additional insights. The Relative Strength Index (RSI), currently at 80.78, signals that gold is in overbought territory, suggesting a possible retracement or consolidation might be on the horizon. However, the 50-Day Exponential Moving Average (EMA), at $2,045.64, indicates that the trend is firmly bullish in the short term, with prices maintaining above this key moving average.

Chart patterns underscore the strength of the current trend, with the price action breaking past the $2,041.29 resistance level, hinting at sustained bullish momentum. This break, coupled with robust trading volumes, suggests that traders continue to find value in gold as a safe haven amid market uncertainty.

In conclusion, while the overall trend for gold remains decidedly bullish, the recent push into overbought territory may temper expectations for the immediate term. Investors should prepare for potential volatility with an eye on key technical levels, as the market determines if gold will continue its impressive climb or take a breather. The anticipation is for gold to test further resistances, particularly as it approaches the Fibonacci extension level at $2,057.05.

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