16 Dec 2024

Gold prices experienced a rebound early on Monday following two consecutive days of decline. The US Dollar has weakened alongside Treasury bond yields as market participants adjust their positions ahead of the Federal Reserve's upcoming decisions. Currently, gold is seeking a definitive trend, with a neutral daily Relative Strength Index (RSI) observed at approximately $2,650.

Gold prices appear poised to commence the final full week of 2024 on a positive note, maintaining a level around $2,650 early on Monday. The US Dollar (USD) is experiencing a decline, accompanied by a decrease in US Treasury bond yields, in anticipation of the S&P Global Preliminary US business PMI data scheduled for release later today.

Gold prices are rebounding as traders adjust their positions ahead of the Federal Reserve meeting. In Asian trading on Monday, gold buyers are emerging after a two-day correction from the five-week peak of $2,726 reached last Thursday. It seems that traders are taking profits from their long USD positions in preparation for the critical policy announcements from the US Federal Reserve on Wednesday.

Markets have fully anticipated a quarter percentage point interest rate reduction by the Federal Reserve this week, as indicated by CME's FedWatch tool. Nevertheless, there is an expectation that the Fed will adopt a wait-and-see approach in January, given the inflationary risks associated with the likely protectionist policies of US President-elect Donald Trump.

This sentiment has contributed to the continued strengthening of the US dollar and an increase in US Treasury bond yields over the past week. Traders are now keenly awaiting the Fed's decision to determine whether the central bank will indicate fewer rate cuts in 2025 than previously expected.

The price of gold is also receiving support from the escalating tensions between Israel and Gaza, as well as the political instability in South Korea. According to Reuters, an airstrike targeted the civil emergency center in the Nuseirat market area of the central Gaza Strip, resulting in the deaths of Ahmed Al-Louh, a video journalist for Al Jazeera TV, and five others, as reported by medical personnel and fellow journalists.

In South Korea, the parliament voted to impeach President Yoon Suk Yeol on Saturday following a motion introduced by an opposition-led coalition regarding Yoon's brief declaration of martial law earlier this month. Han Dong-hoon, the leader of the ruling party in South Korea, resigned amid criticism over his support for President Yoon's impeachment. Historically, gold prices tend to rise during periods of geopolitical and political turmoil.

However, it remains uncertain whether the gold price will maintain its upward momentum. A similar pattern was observed during Friday's Asian session, where gold initially rose but ultimately succumbed to the strength of the US dollar as the weekend approached.

Potential further increases in gold prices may be limited by growing economic concerns in China, where industrial output growth showed a slight uptick in November, while retail sales fell short of expectations. Additionally, the widening discounts on gold in India, driven by reduced demand during the wedding season due to rising prices, could also weigh on the precious metal. China and India are the largest consumers of gold globally.

Furthermore, the upcoming US PMI data will be significant for gaining insights into the Fed's interest rate trajectory for the next year, which could have a substantial impact on market dynamics.

Gold price technical analysis:

As indicated on the daily chart, the price of Gold is currently testing the support of the 21-day Simple Moving Average (SMA) at $2,650.

The 14-day Relative Strength Index (RSI) remains stable around the 50 mark, indicating an absence of a definitive directional trend at this time.

Should Gold buyers demonstrate strength, a rebound may lead to a challenge of the 50-day SMA at $2,670, and if surpassed, the $2,700 level will be in focus.

Further upward movement could revisit the multi-week peak of $2,726.

Conversely, a daily close below the 21-day SMA at $2,650 may necessitate a retest of the low from December 6, which stands at $2,613.

The critical support level for Gold buyers is identified at the $2,600 region, where the 100-day SMA aligns with the low recorded on November 26.