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.
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.
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
Disclaimer: Trive South Africa (Pty) Ltd, Registration number 2005/011130/07, and an Authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act 2002 (FSP No. 27231). Any analysis/data/opinion contained herein are for informational purposes only and should not be considered advice or a recommendation to invest in any security. The content herein was created using proprietary strategies based on parameters that may include price, time, economic events, liquidity, risk, and macro and cyclical analysis. Securities involve a degree of risk and are volatile instruments. Market and economic conditions are subject to sudden change, which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. When trading or investing in securities or alternative products, the value of the product can increase or decrease meaning your investment can increase or decrease in value. Past performance is not an indication of future performance. Trive South Africa (Pty) Ltd, and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered from using or relying on the information contained herein. Please consider the risks involved before you trade or invest.