Gold Subdued as Inflation Looms

Fuelled by anticipations of upcoming rate cuts by the Federal Reserve in the early months of the coming year, the gold spot price (XAUUSD) has experienced positive effects from a weakened dollar and decreasing US treasury yields. Nevertheless, some Federal Reserve officials have contested this viewpoint, asserting that it is premature to engage in discussions about rate cuts. Consequently, the US equity market faced a downturn on Wednesday, breaking a nine-day winning streak.  

Interestingly, this downturn further propelled the ascent of gold. The renewed demand for safe-haven assets played a pivotal role in supporting its growth despite the diminishing optimism surrounding the rate cut narrative. Looking ahead, the PCE data scheduled for release on Friday holds significant potential to influence the future trajectory of gold and could pave the way for consolidative price movements in the upcoming session. 


The consolidation is evident on the 4H chart after the descending wedge broke out. Support from the 25-SMA (green line) underpins the spot price close to the Fibonacci midpoint at $2,031.93/ounce, while the 61.8% Fibonacci golden ratio provides resistance at $2,045.72/ounce in the formation of an ascending triangle, which could signal a potential bullish break. 

If the breakout occurs above $2,045.72/ounce, the resistance at $2,052.68/ounce could present the first hurdle to the buyers. If they succeed in crossing this level, the breakout could be sustained toward $2,060.20/ounce and $2,072.70/ounce. 

However, a break below the 25-SMA could have major implications on the market’s sentiment, which could trigger a leg down toward the 100-SMA (orange line) at $2,026.05/ounce and the 50-SMA (blue line) at $2,016.71/ounce. Any movement below these levels could signal a bearish momentum reversal, bringing lower support at $2,006.21/ounce into play.  


With a renewed appeal for safe haven assets, the gold spot price held firm in the Thursday session. However, the PCE data on Friday could be crucial in determining whether the recent uptrend could be sustained, with the $2,045.72/ounce resistance being a pivotal one to watch as we advance. 

Sources: Koyfin, Tradingview 

Piece written by Tiaan van Aswegen, Trive Financial Market Analyst 

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