Gold prices found its legs in the US session rising back above resistance at the $2040/oz level. A slightly stronger US Dollar kept Gold bulls at bay in the European session, but ongoing comments from Fed policymakers around rate cuts continue to weigh on the Greenback.
Geopolitical tensions have become a key driver this week following developments in the Middle East. The Red Sea has become breeding ground of uncertainty, and this seems as if it is only going to intensify. This leaves Gold in the driver’s seat with more gains in store if no solution is found to the ongoing strife and tension in the Middle East.
The renewed US Dollar weakness has also assisted Gold hold the high ground and continue its advance. Federal Reserve policymakers have this week struck a dovish tone with most speaking about the amount of rate cuts needed in 2024 with very little push back besides the odd comment about monitoring data moving forward. The only push back in terms of comments came from Policymaker Barkin saying that he thinks inflation is more stubborn than the average Fed official.
US Treasury Yields also continued their struggles today with both the 2Y and 10Y yield which is also benefitting Gold.
US2Y and 10Y Daily Chart
US DATA AHEAD
US data lies ahead with a key print being the US PCE data which is due on Friday. This may have a significant impact on US rate expectations before the year is out while we also have the final Q3 GDP number.
There is other “high impact” US Data due with CB consumer confidence and the final Michigan Consumer Sentiment number which should not have a material impact but rather short-term moves that could be erased toward the end of the trading session.
Form a technical perspective, Gold is interesting following the recent selloff which stopped last week as Gold printed an indecisive candle close. This should have given us a sign that we may get further upside this week which has come to fruition but further upside in my opinion appears limited.
As things stand a daily candle close above the $2040 mark this could facilitate a run toward resistance at the $2050 mark and beyond with the fundamental picture supporting this narrative. However, I have a feeling that a retracement may come into play soon with a host of resistance area between the $2050 and $2078 handles which may prove to be a hurdle to far.
Key Levels to Keep an Eye On:
Gold (XAU/USD) Daily Chart – December 19, 2023