The Gold Spot Price (XAUUSD) staged an impressive rally with a notable surge of 13.07% in 2023. This surge marked a significant turnaround, putting an end to two consecutive years of losses.
What fuelled this remarkable resurgence? A pivotal factor was the shifting tides of market sentiment, particularly as the Greenback stumbled, creating a favourable environment for the spot price to shine. With markets signalling a 72% likelihood of Federal Reserve rate cuts in March, gold, traditionally challenged in high-interest rate climates due to its non-yielding nature, found newfound favour amidst this changing economic landscape.
This week, the spotlight is on crucial events like the FOMC Minutes, Job Openings, and the Nonfarm Payrolls report. These key indicators promise to unveil insights into the Federal Reserve’s monetary policy stance and labour market dynamics—an influential driver of inflation. As these events unfold, they are poised to wield substantial influence over the short-term trajectory of the gold spot price, guiding the sentiments and strategies of traders navigating this glittering commodity.
Technical
The Gold Spot Price charted an intriguing journey as 2023 drew to a close, showcasing three consecutive weeks of gains within a prevailing uptrend, confidently positioned well above the 100-day moving average. Amid this ascent, the spot price reached unprecedented heights, only to experience a retracement due to overbought conditions on the Relative Strength Index (RSI).
This retracement etched a notable resistance level at 2143.31 per ounce, a marker left behind as the spot price briefly dipped below the 100-day moving average on the four-hour chart. However, the downward momentum found its limit at the 1973.03 per ounce level, just below the 61.80% Fibonacci Retracement Golden Ratio, where oversold RSI conditions prevailed, setting the stage for a reversal.
Witnessing this reversal, the spot price surged above the 100-day moving average, now inching closer to a potential retesting of the 2143.31 per ounce resistance level. Should the upward momentum persist, this level could stand as a focal point of interest. Conversely, should downside pressures weigh on the spot price, attention may shift to the 50% level, currently aligned with the 100-day moving average, serving as a potential support zone.
Summary
In 2023, the Gold Spot Price rebounded remarkably, ending two years of decline with a substantial 13.07% surge, driven by a shifting market sentiment favouring gold amidst potential Federal Reserve rate cuts. Technical cues, like the recent retracement and subsequent rebound, indicate pivotal levels influencing its trajectory, awaiting insights from key economic indicators to navigate its path ahead.
Sources: CME, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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