According to recent trading, gold is facing a major test of investor appetite as the Federal Reserve begins a long-awaited pivot to lower US interest rates. Since the Fed's last meeting, the price of gold XAU/USD has been on a strong upward trajectory, culminating in a test of a new all-time high of $2,135 per ounce. Last week, trading closed at around $2,053 per ounce after testing resistance at $2,070 per ounce in the same trading session.
Overall, the price of the yellow metal has continued to rise after Federal Reserve policymakers said they expect to cut US interest rates by 75 basis points next year. Already, the slowdown in US inflation had prompted investors to prepare for easing, pushing gold prices briefly to an all-time high that surprised everyone.
With monetary easing now definitively on the agenda, gold traders will be watching the return of big money investors who could pave the way for a more sustained rally after two years on the sidelines. Moreover, they have long shunned non-interest-bearing bullion, with inflation-adjusted Treasury yields rising to their highest levels since the financial crisis. Obviously, this has caused continued outflows from gold-backed ETFs, which have been a significant headwind for the yellow metal. However, with bond yields falling and the US Federal Reserve signaling easing in 2024, this may be about to change.
Will the price of gold decrease in the coming days?
In this regard. “The return of a favourable environment for gold flows is clearly happening,” said Marcus Jarvi, commodities analyst at Macquarie Group Ltd. Adding, “And next year, I’m still very optimistic.”
With prices hovering just below $100 per ounce, slightly off the recent record in a chaotic trading session, investors may be cautious about entering the market. Recently, gold trading still maintains a significant premium compared to real Treasury bond yields – one of its major drivers – on a historical basis. This premium has persisted for over a year, thanks to central banks' record purchases that boosted sales from investors. Also, it appeared poised to close in September with a gold decline, only for an attack by Hamas on Israel to trigger a price surge amid short-covering.
Even with fading concerns about the extension of the conflict, the gold price continued to trade at elevated levels, establishing a high price base for future increases. Furthermore, even a modest resumption in buying by exchange-traded fund (ETF) investors could have a substantial impact on sentiment. Overall, the pace of new buying is likely to be determined by the pace of U.S. Federal Reserve interest rate cuts in the new year. Currently, derivatives traders are pricing in roughly double the easing signaled by the recent statement from the U.S. central bank, leaving the gold price vulnerable to declines if a cautious approach is adopted.
Commenting on this, Carsten Meinke, an analyst at Julius Baer Group Ltd, said: “There is no need for a quick reversal in US monetary policy. Therefore, we see gold and silver prices on a weak basis.” Shortly, Attention will remain fixed on US economic data next year, with stronger-than-expected inflation or strong jobs numbers likely to frustrate those betting on multiple interest rate cuts.
Gold Price Forecast and Analysis Today:
In the context of the Christmas holidays, the price of gold “XAU/USD” may remain on its track according to the latest analysis. The general trend is still up, and stabilizing around and above the psychological resistance of $2,000 per ounce still confirms the bulls' dominance of the trend. Also, the continued weakness of the US dollar is still supporting the gold market.
Technically, the closest resistance levels for gold are $2,055, $2,070, and $2,085, respectively., currently, these levels are enough to push all technical indicators towards overbought levels. Therefore, it is not surprising that profit-taking sales may occur at any time.
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