Gold Price Rebounds: Traders are likely unsure how gold would react to another upside surprise this time around. If demand for inflation protection dominates, gold could be headed back to weekly highs and its 200DMA. If bets on a hawkish Fed shift dominate, gold could be headed under recent lows in the $1,760s.
To explain, while gold prices, silver price, and mining stocks rallied hard in October, their price action was more of a trick than a treat. And with the trio becoming part of the bears’ Thanksgiving dinner in November, only Santa Clause can save them now.
However, while the S&P 500 had uplifted sentiment, the GDX ETF closed the Dec. 9 session one cent below its Dec. 3 close and the senior miners gave back all of their early-week stock-market-induced gains. As a result, investors aren’t showing much faith in the GDX ETF’s medium-term prospects.
From a technical perspective, gold has been oscillating in a familiar trading band over the past two weeks or so. Given the recent sharp pullback from a multi-month high, around the $1,877 region, the range-bound price action could still be categorized as a bearish consolidation phase. The negative outlook is reinforced by the fact that spot prices have repeatedly failed to clear/find acceptance above a technically significant 200-day SMA. This, in turn, suggest that the near-term bias remains tilted firmly in favour of bearish traders.
Gold Selling Below $1,745 Key Level
That said, it will still be prudent to wait for a convincing break through the $1,773-72 area before positioning for a slide back towards testing the monthly swing low, around the $1,762 region. Some follow-through selling below the $1,745 zone will confirm a fresh bearish breakdown and drag gold prices further towards the next relevant support near the $1,721 key level.
On the flip side, any subsequent move up might continue to confront stiff resistance near the $1,795 region (200-DMA). The mentioned barrier coincides with 100-day SMA and is closely followed by the $1,804 round-figure mark. A sustained strength beyond has the potential to lift spot prices to the next relevant resistance near the $1,815 supply zone en-route the $1,835 horizontal barrier. The latter should act as a key pivotal point for short-term traders.
Gold Price Fundamental Outlook By Neal Bhai
Gold price is extending Thursday’s pullback from five-day highs, having stalled its early rebound amid the renewed upside in the US Treasury yields across the curve. In doing so, gold price is set to book the fourth straight weekly loss, unable to find acceptance above the critical confluence zone of the 100 and 200-Daily Moving Averages (DMA) at $1,792. The bears are now heading towards strong support at $1,760, with eyes on the US inflation data for fresh trading impetus. The US Consumer Price Index (CPI) is seen higher at 6.8% YoY in November vs. 6.2% booked previously. The US inflation data is likely to cement the hawkish Fed expectations, with a 44% probability of a June 2022 rate hike, according to the CME Group’s FedWatch Tool. In the meantime, the sentiment around the yields and the dollar will continue to influence gold price.
Gold Attracted Some Buying During
Gold prices attracted some buying during the Asian session on Friday and recovered a part of the previous day’s slide back closer to the weekly low. Mixed headlines on the Omicron variant of the coronavirus kept a lid on the recent optimism, which was evident from a softer tone around the equity markets. This, in turn, was seen as a key factor that assisted the safe-haven yellow metal to regain some positive traction.
Meanwhile, the US dollar struggled to capitalize on the previous day’s positive move and witnessed a subdued/range-bound price action on the last day of the week. This further acted as a tailwind for the dollar-denominated commodity, though the uptick lacked bullish conviction. Expectations that rising inflationary pressure would force the Fed to tighten its monetary policy sooner rather than later capped gains for the non-yielding gold.
FOMC Policy Meeting on December 14-15
Moreover, investors also seemed reluctant, rather preferred to move on the sidelines ahead of the US consumer inflation figures, due for release later during the early North American session. The US CPI report would influence the Fed’s decision to taper its stimulus at a faster pace and its strategy on interest rate hikes. This will influence the USD demand and provide a fresh impetus to gold prices heading into the FOMC policy meeting on December 14-15.
