Market Divided on Whether Gold Prices Can Continue Higher

Commodity

Central Bank

Summary:

On Tuesday, the gold market continued to attract new attention, and the price remained firmly above US$2,000, close to a six-month high. Although the market shows some passive momentum, there are different ideas about whether it can continue to rise.

SELL XAUUSD

Close Time

CLOSED

2046.00

Entry Price

1901.00

2065.00

4212.04 +14.13 +0.34%

190.0

Pips

Loss

1901.00

2065.01

Exit Price

2046.00

Entry Price

2065.00

Fundamentals

At present, the gold market is benefiting from new expectations for the Fed to cut interest rates. According to the CME FedWatch tool, the market expects that the possibility of an interest rate cut as early as March is 25%, and it is more likely to cut interest rates in May or June. Spot gold was last at US$2,023 per ounce, an intraday gain of 0.65%.

Some analysts pointed out that, no matter what is expected, weak growth and cooling inflation will support the final interest rate cut, which will continue to support the gold price. These supports have been supported by weak U.S. data and weakened hawkish remarks of the Federal Reserve in recent weeks.

Goldman Sachs commodities analysts released a report stating that gold prices are expected to rise by 2024. In the report titled "Gold's Shine Is Returning," the analysts raised their 12-month price target to US$2,050 per ounce.

Analysts predict that the potential rise in gold prices will be closely related to the real interest rate in the U.S. and the trend of the USD. They also expect that the consumer demand in China and India will continue to be strong, and the central bank will make purchases to offset the downward pressure caused by unexpected growth and interest rate cuts and repricing.

Nick Cawley, a senior strategist at DailyFX.com, said that gold continued to benefit from strong seasonal factors, as prices rose sharply in the last month of this year. A closing price above US$2,009 will open the door for a rebound to US$2,049 per ounce.

However, not everyone believes that the price of gold is ready to take off. We believe that it may only be a matter of time before the price hits a record high, but there is still some resistance in the market at present. The current trading range of gold price is in a "thin area". Considering the technical advantages of the gold price, it is only when it clearly breaks through US$2,080 that it has a chance to hit a record high.

A break above the all-time high of around US$2,080 could eventually push prices to US$2,130, which is the fundamental Fibonacci level. However, the market does face some challenges in realizing this goal.

Gold needs a strong driving force to achieve this bullish scenario. The current prospect shows that gold will form a triple top (a reversal model). However, in the rapid upward reversal since the beginning of October, its rationality is now questioned. The most direct doubt is that the gap (US$1,835-US$1,844) caused by the conflict between Palestine and Israel has not been filled. (If the gap is not filled, the price will not go out of the range.)

In any case, the price development of gold is expected to define the trend in the coming months in the next few days, because we may see breakouts above long-term and psychologically important resistance levels, or the beginning of a bearish market for months or even years.

Market Divided on Whether Gold Prices Can Continue Higher_1

Fundamentals

Market sentiment began to deteriorate as investors waited for some FOMC officials to speak and spot gold was last at US$2,023 per ounce, an intraday gain of 0.65%.

In the 1D timeframe, it shows that gold prices are in an uptrend, with the bulls dominating. In terms of momentum indicators, the MACD is reinforcing its bullish structure above the trigger line and the zero line; however, the Stochastic Oscillator is showing an overbought condition, which stays above the 80 level; therefore, a bearish correction is possible in the coming sessions.

On the upside, attention needs to be paid to the April 23 swing high of US$2,048, followed by the next resistance level at US$2,058. If it manages to break above these levels, the focus will shift to the all-time high of US$2,080.

On the other hand, bears would have to push prices below the US$2,009 level on October 27 before they could extend the decline to the US$2,000 threshold.

Overall, according to stochastics, gold is strongly bullish in the short term; therefore, concerns about a bearish pullback could increase before it moves higher again. It is recommended to set the foundation.

Trading Recommendations

Trading direction: Short

Entry price: 2046

Target price: 1901

Stop loss: 2065

Deadline: 2023-12-12 23:55:00

Support: 2016, 2009, 1988, 1984

Resistance: 2032, 2040, 2048, 2058

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