Despite the holidays, weak liquidity, and the absence of major economic releases, the price of gold (XAU/USD) remained on an upward momentum with gains extending to the resistance level of $2,088 per ounce, close to the record high of $2,135 per ounce set by the yellow metal. Recently, weakness in the US dollar allowed gold to complete the rebound higher. In addition, strong demand for Treasury bonds indicated investor confidence that the US Federal Reserve will ease monetary policy next year.
US bonds rose on Wednesday, pushing yields to levels not seen in months, amid growing expectations that US inflation will continue to slow to a level low enough to convince policymakers to begin cutting interest rates soon. In this regard, swap markets expect a roughly 90% chance of a cut by March. Lower yields and rates are typically bullish for non-interest-bearing assets like bullion.
Overall, the price of gold (XAU/USD) has risen by 14% this year and is on track to post its first annual increase in the last three years. Historically, Gold prices hit a record high of $2,135.39 per ounce in early December 2023.
In general, the last week of 2023 lacks any major economic updates in the United States. Overall, investors were encouraged by reports showing that US inflation is declining even as the economy appears stronger than expected. The Federal Reserve is walking a tightrope, seeking to slow the US economy enough through high interest rates to calm inflation, but not so much that it pushes the country into recession. US inflation slowed to 2.6% in November, according to a measure closely monitored by the Federal Reserve. Meanwhile, this is less than 7.1% in mid-2022 and close to the US central bank's target of 2% inflation. US economic growth has remained flat since contracting in mid-2022 and accelerated sharply in the third quarter of 2023.
The data has raised hopes that the US economy is likely to avoid a recession, or at least avoid a major recession. Also, they encouraged Wall Street markets to bet that the Fed is done raising interest rates and will likely turn to lower rates in the new year. The central bank has kept interest rates steady since its July meeting, and Wall Street markets expect it to begin cutting rates as early as March.
Gold Price Forecast and Analysis Today:
Based on the performance on the daily chart below, the overall trend for the gold price (XAU/USD) remains upward. As mentioned before, it will continue as long as it stays above the psychological resistance of $2000 per ounce. Currently, the gains have been sufficient to drive technical indicators toward levels saturated with buying pressure, indicating a potential profit-taking sell-off at any time. Therefore, Caution is advised. So far, the nearest resistance levels for the trend are $2100 and $2125 per ounce, respectively. On the other hand, during the same time frame, a trend reversal will not occur without a move back towards the psychological level of $2000 per ounce.
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