Gold is attracting some dip buying on a softer risk tone and a modest USD decline. According to analyst Haresh Menghani, the fundamental backdrop for the gold price is in favor of the bulls. This supports expectations for further earnings. However, it needs to break the short-term trading range to confirm the positive trend.
Fed moves away from hawkish stance, gold gains strength
The gold price regained positive momentum on Thursday. Thus, it reversed much of the previous day’s decline amid bearish sentiment surrounding the dollar. cryptokoin.comAs you follow from , the US Federal Reserve (Fed) is moving away from its hawkish stance. There is growing acceptance in the market that rates will start to be cut as early as March 2024. This pushed US Treasury bond yields to their lowest level in recent months. In fact, the yield on the benchmark 10-year US government bond fell to its lowest level since July, weakening the dollar and benefiting the US dollar-denominated commodity. Additionally, the softer risk tone in equity markets also triggered haven flows into gold.
The path of least resistance for the gold price is up!
Meanwhile, the expectation of a global interest rate reduction cycle dominates the markets. This shows that the path of least resistance for the non-returnable gold price remains upwards. The median forecast in the Federal Open Market Committee (FOMC) members’ Summary of Economic Forecasts calls for the federal funds rate to end at 4.6% in 2024. This indicates three 25 basis point (bps) rate cuts. Meanwhile, CME Group’s FedWatch Tool shows markets pricing in a cumulative rate cut of about 150 basis points by the end of next year. In addition, inflation in the UK fell to its lowest level in two years in November. This increased expectations that the BoE would start reducing interest rates in the first half of next year.
Investors focus on US PCE data due on Friday
However, Fed and ECB officials are pushing back against market bets on rapid rate cuts next year. This prevents bulls from making aggressive bets around the gold price. Investors are also opting to wait on the sidelines ahead of the US Core Personal Consumption Expenditures (PCE) Price Index, which will be released on Friday, which could influence the Fed’s future policy decision and provide a new directional momentum for the non-yielding yellow metal.
Gold price analysis: Technical outlook favors the bulls
Market analyst Haresh Menghani evaluates the technical picture of gold. From a technical perspective, the recent range-bound price action is forming a rectangular pattern on short-term charts. It also indicates a consolidation phase before the next leg of a directional move. In the background of the rally that took place around the 50-day Simple Moving Average (SMA) after the FOMC last week, the formation of a ‘golden cross’ with the 50-day SMA being kept above the 200-day SMA is in favor of bullish investors. Additionally, the oscillators on the daily chart remain in positive territory. Moreover, it is still far from being in the overbought zone. This confirms the constructive outlook for the gold price.
However, it would still be prudent to wait for a sustained breakout around the $2,047-2,048 region, which is the upper limit of the aforementioned trading band, before positioning for a further appreciating move. Gold is then likely to start positive action towards the next relevant hurdle near $2,072-2,073. It is possible that the momentum will increase further. In this case, it is possible that the gold price will regain the round figure of $2,100.
On the other hand, the nearest support lies near the $2,028-2,027 zone. This is followed by the $2,017 zone, or the lower end of the trading band. If it breaks, it is possible to change the short-term trend in favor of bear traders. The ensuing decline would likely push the gold price towards the psychological $2,000 limit. Moreover, it could head towards the 50-day SMA, which is currently near the $1,992-1,991 zone. The gold price may then decline towards the $1,973 region, which was last week’s low. Then, it is likely to decline further towards the technically important 200-day SMA near the $1,957 region.
To be informed about the latest developments, follow us twitter‘in, Facebookin and InstagramFollow on and Telegram And YouTube Join our channel!