The continued weakness of the US dollar and ongoing global geopolitical tensions have been a conducive environment for further bullish control over the direction of gold prices XAU/USD recently. The gains extended towards the resistance level of $2007 per ounce before closing the week stable around $2002 per ounce. The decline of the US dollar following the decrease in US inflation rates and the impacted expectations of tightening the US central bank's policy was an important factor in strengthening the upward trend of gold.
Gold Price Forecasts for the Coming Days:
Inflation rates are trending downwards, and it seems that global central banks are softening their strong cycle of interest rate hikes. There are still few signs that the global economy is slipping into anything more harmful than a mild slowdown. By all measures, gold — a haven of stability and a store of value during market turmoil — should be declining. But it's not. Many investors are considering whether to gain exposure to gold through physical ownership, stocks, or exchange-traded funds (ETFs). Some reasons for gold's relative strength this year are clear. There are conflicts that could widen in Ukraine and Israel. Stock and bond markets have fluctuated at different times in 2023. Other forces have also helped boost bullion prices.
One important driver of price strength under observation is the increasing demand from central banks for actual gold amid slow but steadily increasing pressure on the reserve currency status of the US dollar. On November 10th, the rating agency Moody's downgraded its outlook for the US credit rating to "negative" from "stable," citing a sharp increase in debt service costs and "entrenched political polarization." The agency added that the change in its outlook reflects increased negative risks to the country's financial strength.
Such developments have decoupled gold prices from their usual inverse relationship with US bond yields, according to BMO Global Asset Management (GAM). This has pushed the price of bullion in recent months towards around $2050 per ounce. This is considered a key technical level, where historical price movements are examined to identify patterns and predict future price movements with some accuracy. If the gold price surpasses this threshold, it is likely that high prices will continue, as BMO GAM analysts said in a research report released in November.
Today's Gold Analysis:
As I mentioned before, the stability of the gold price XAU/USD around and above the psychological resistance of $2000 per ounce crowns the extent of the strength and control of the bulls over the general upward trend. If the weakness of the US dollar continues, global geopolitical tensions increase, and central banks' purchases of gold grow, all these combined factors will support more gains for gold prices in the coming days. However, the resistance levels of $2015 and $2027 respectively will be the next targets for the bulls and are enough to push the technical indicators towards strong overbought levels. In case of the opposite happening during the trading week that is heavy with US economic data and statements from many officials of the US Federal Reserve's policy, gold prices may face sell-offs for profit-taking, and a breach of the general upward trend will not occur without moving towards the level of $1977 per ounce.
