Gold spot prices (XAUUSD) are poised to end the year on a high, buoyed by expectations of U.S. Federal Reserve rate cuts next year and safe-haven demand amidst geopolitical tensions. After a 14% climb in 2023, marking its best performance since 2020, the precious metal could see further gains in 2024, but the near-term outlook remains choppy.
The yellow precious metal’s upward trajectory in 2023 has been heavily influenced by cooling US inflation, raising bets of an impending shift towards monetary easing by the Federal Reserve. This dovish sentiment reiterated during the Fed’s December policy meeting, solidified market views on multiple rate cuts in the coming year.
Furthermore, geopolitical tensions in the Middle East and ongoing conflicts, particularly in Gaza, bolstered gold’s appeal as a safe-haven asset. The weakened dollar, set for its worst yearly performance in three years, contributed to gold’s allure for investors holding other currencies.
Technical
The 4-hour chart shows that Gold is currently hovering around $2,072.49/ounce, finding support at the ascending channel’s lower bound after a recent pullback. The price action trades above all three key moving averages [20-SMA (green line), 50-SMA (blue line), 100-SMA (orange line)], indicating positive momentum.
While near-term consolidation is likely, the bullish momentum remains intact, driven by the Fed’s dovish stance and geopolitical uncertainties. Short-term trading opportunities could arise towards the initial resistance at $2,088.38/ounce should the bulls sustain a push higher. A break above the $2,088.38/ounce level would likely bring the $2,100.44/ounce resistance level into play in the short term.
However, with a flat RSI (56.07) leaving the potential for price consolidation in the near term, there is a possibility for a short-term push to lower levels. Therefore, short-term trading opportunities could exist towards the support level at the $2,061.63/ounce price level should the bears sustain a push lower. A break below the initial support could confirm the bearish momentum, likely bringing the $2,048.04/ounce support level into play.
Summary
Gold maintains its upward momentum, supported by expectations of US rate cuts in 2024 amid softer inflation data. The metal remains attractive amidst geopolitical tensions and a weaker dollar.
Gold’s near-term trajectory appears to be a tug-of-war between bullish hopes and potential profit-taking. While the fundamentals favour further ascent towards $2,088.38/ounce and $2,100.44/ounce, the flat RSI and approaching year-end could lead to short-term dips.
Sources: TradingView, Trading Economics, Reuters, Dow Jones Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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