Gold prices tested a multi-day high of $2,048 on Tuesday. However, it pulled back on Wednesday and is gaining ground near $2,030. The US Dollar is licking its wounds along with US Treasury bond yields. Meanwhile, it keeps gold buyers hopeful.
All eyes on US PCE data for gold prices
US Federal Reserve (Fed) policy makers are doing their best to push back on expectations of possible interest rate cuts next year. However, the market’s pricing for a rate cut remained unchanged. Markets see a 75% probability that the Fed will cut interest rates in March. Moreover, a rate cut in May is almost certain.
Continuing bets that the Fed will take a dovish step in 2024 continue to weaken US Treasury yields and the US Dollar in a week of relatively scant data. Therefore, all eyes are on Friday’s US Core PCE Price Index. Expectations are for core PCE to increase at an annual rate of 3.3% in November, compared to a 3.5% increase in October. The Fed’s inflation target is 2.0%. Market analyst Dhwani Mehta explains the impact of the data on gold prices as follows:
Because this is the Fed’s preferred inflation indicator. Therefore, data in line with expectations will strengthen bets on interest rate cuts in March. This will also be supportive for gold prices. However, if US inflation is higher than expected, this may change the situation. This would indicate that inflationary pressures are still high and the Fed should stay ‘higher for longer’. In this case, the gold price will continue its recovery mode.
Gold price technical analysis
Here’s how market analyst Dhwani Mehta reads the technical picture for gold. Technically, nothing seems to change for the gold price. Because the path of least resistance is still up. The 14-day Relative Strength Index (RSI) indicator remains above the middle line. Gold, on the other hand, is currently defending the 21-day Simple Moving Average (SMA) at $2,021. A daily close below this level is required for the recovery mode to end and the $2,000 threshold to be tested. Further below, the 50-day SMA at $1,989 will challenge the bulls.
On the other hand, it is important for the gold price to be accepted above the $2,040-2,050 supply area to continue its journey towards the psychological level of $2,100. Further up, gold buyers will look to see the all-time high at $2,144.
Gold market technical analysis
Technical analyst Christopher Lewis draws the technical picture of gold as follows. Gold prices pulled back slightly during Tuesday’s trading session. But it again showed resilience as we saw most market participants coming to buy “cheap gold” going forward. All else being equal, we’re heading into the holidays, which will wipe out some liquidity and could make the market quite noisy. Below it, there is plenty of support near the $2,000 level. However, the $2,000 level also broke down once or twice. This is likely to reveal the possibility of a move towards the 50-Day EMA. Of course, the 50-Day EMA is an indicator that many people pay close attention to. It also provided quite a bit of dynamic support.
Overall, this is a market that I think will eventually try to move towards the $2,050 level and then the $2,075 level, which is an area where we’ve seen a lot of movement in the past. Then of course we have that big wick. If we were to test this area, liquidity could again be an issue. However, we’ll probably see it happen eventually. Overall, this is a market that continues to support the upside as interest rates in the US continue to fall. Also, of course, we have to consider the idea of geopolitics entering the market. Because the tension seems to be increasing even more. This provides upward support for gold prices.
All else being equal, as we continue to see central banks around the world adjust monetary policies, we will likely continue to find buyers willing to take advantage of “cheap gold.” With that in mind, I like the idea of staying in the market for a long time. But I also realize that volatility will likely get worse over the next week or two.
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