As the Wednesday session kicked off, the gold spot price (XAUUSD) maintained its steadiness at approximately $1,980 per ounce, creating an atmosphere of anticipation in the lead-up to the Federal Reserve’s final interest rate decision for the year. While the prevailing market sentiment leans towards a pause, the remarks from Jerome Powell hold the potential to shape the roadmap for potential rate cuts in the upcoming first half of the year.
Tuesday witnessed the year-over-year US inflation falling in line with expectations at 3.1%, a slight decrease from the prior month’s 3.2%, while core inflation held steady at 4%, aligning precisely with market predictions. Despite commendable strides in aligning inflation with targets, the recent robust jobs report has introduced an element of unpredictability, challenging optimistic speculations of aggressive rate cuts in the initial half of the forthcoming year. With all the pieces in place, the stage is now set for the highly awaited event, promising significant price action in the gold market.
Technical
On the 4H chart, a falling wedge is in play, while the crossing of the 25-SMA (green line) below the 100-SMA (orange line) confirms the presence of sellers. However, a psychological demand zone is keeping the bulls in play, leading up to an exciting Wednesday session.
At $1,976.43/ounce, the demand zone underpins the bounce back in the gold price, while resistance at $1,991.68/ounce, the 61.8% Fibonacci golden ratio presents a major hurdle that needs crossing to enforce a breakout from the bullish wedge pattern. Should the price fall below the demand zone, support at $1,964.47/ounce could be a level of interest to potentially prevent a breakdown of the wedge toward $1,956.26/ounce.
However, a breakout could occur at $1,991.68/ ounce if the demand zone holds. To confirm the sustainability of this breakout, the price may need to clear $1,999.85/ounce at the 25-SMA, which could open a path of convergence toward the prior Fibonacci midpoint at $2,010.23/ounce.
Summary
It is all to play for in the gold market on Wednesday as the Federal Reserve braces for its final interest rate decision of the year. Resistance at $1,991.68/ounce could be the level to watch in the upcoming sessions, as a breakout from the falling wedge could occur.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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