The Gold Spot Price (XAUUSD) has witnessed a notable resurgence, marking a 1.58% uptick week-to-date after a recent setback. This resurgence mirrors the intricate relationship between gold and monetary policy, notably following the Federal Reserve’s decision to maintain interest rates within a 22-year high range of 5.25% to 5.50%.
Gold, known for its inverse relationship with interest rates due to its non-yielding nature, experienced a renewed rally amid hints of potential rate cuts by the Fed. This move is especially noteworthy considering the overwhelming consensus among 17 of 19 Fed officials projecting a lower policy rate by 2024’s end.
The impact of this dovish sentiment was twofold: triggering a decline in the Greenback while propelling the Gold Spot Price despite its historical challenges in high-rate environments. As indicated by an 89% probability, market anticipation is palpable, signalling expectations for an impending rate cut in March 2024, as per the CME FedWatch Tool.
As the week nears its conclusion, all eyes pivot toward forthcoming economic indicators, notably the PCE Price Index—an influential measure of inflation preferred by the Federal Reserve—scheduled for release next Friday.
Technical
The Gold Spot Price staged an impressive comeback during Wednesday’s trading session, surging by 2.42% to snap a three-day losing streak and breach the psychological barrier of $2000 per ounce. This rally signifies a potential reversal from a previous downtrend, notably crossing above the crucial 100-day moving average.
This resurgence holds significance as the spot price faced resistance at 2143.31 per ounce following a sharp decline earlier in December. Yet, finding support at 1973.03 per ounce, marked by oversold conditions on the Relative Strength Index (RSI), paved the way for this bullish reversal.
The rally places the spot price within striking distance of the 50% Fibonacci Retracement level, a key marker likely to attract attention should bullish momentum persist. Conversely, the 1973.03 per ounce level could serve as a critical support, impeding downward momentum if bearish sentiment dominates, given the overbought RSI conditions.
Summary
The Gold Spot Price showcases resilience, riding on dovish Fed hints and a 1.58% uptick, countering high-rate challenges. The recent 2.42% surge on Wednesday, breaching $2000, hints at a bullish reversal, navigating key levels. With looming support at 1973.03 and the impending 50% Fibonacci Retracement level, it faces a pivotal juncture amid market anticipation of a Fed rate cut.
Sources: Federal Reserve, CME, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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