Forex world

December 12, 2023

Gold price hangs near multi-week low

- Gold price ticks higher during the Asian session, albeit with a lack of follow-through buying.

- The uncertainty over the timing of when the Fed will start cutting rates caps the upside.

- Investors also seem reluctant to place aggressive bets ahead of the US CPI later today.

Gold price (XAU/USD) edges higher during the Asian session on Tuesday and moves away from a three-week low, around the $1,976-1,975 region touched the previous day. The uptick, however, lacks follow-through buying or bullish conviction as traders seem reluctant to place aggressive directional bets ahead of the release of the latest consumer inflation figures from the United States (US) later today. The crucial Consumer Price Index (CPI) report will play a key role in influencing the Federal Reserve’s (Fed) policy outlook and help determine the near-term trajectory for the non-yielding yellow metal.

In the run-up to the key data/central bank event risk, growing acceptance that the US central bank is done raising interest rates keeps a lid on the post-NFP US Dollar (USD) gains and acts as a tailwind for the Gold price. Investors, however, seem uncertain over the timing of when the Fed may begin easing its monetary policy in the wake of the underlying strength in the US labor market, as was reflected in the Nonfarm Payrolls (NFP) report on Friday. This, along with a generally positive tone around the equity markets, contributes to capping any meaningful appreciating move for the precious metal.

Daily Digest Market Movers: Gold price struggles to attract buyers awaiting fresh catalyst

The upbeat US employment figures released on Friday made traders bet that it could take the Federal Reserve until May to begin a series of interest-rate cuts next year and act as a headwind for the Gold price.

A New York Fed survey released on Monday showed that consumers anticipate inflation to be at 3.4% a year from now, down from an expectation of 3.6% in October and marking the lowest reading since April 2021.

The incoming data raised hopes that inflation could continue to decelerate without the economy falling into a recession and forced investors to trim their bets for the first Fed rate cut move in March 2024.

Market participants, however, seem convinced that the US central bank is done with its policy-tightening campaign and may begin easing its monetary policy by the first half of the next year.

According to CME group's FedWatch Tool, investors are still pricing in over a 40% chance of a March cut of at least 25 basis points (bps) and a nearly 75% chance of such a move in May 2024.

This, in turn, fails to assist the US Dollar to capitalize on the post-NFP positive move and lends support to the non-yielding metal, though bulls seem reluctant ahead of the US consumer inflation data.

The headline CPI is expected to rise by 0.1% in November and the yearly pace ticked down to 3.1%. The core gauge is anticipated to edge up from 0.2% to 0.3% MoM and hold steady at a 4.0% YoY rate.

The market attention will then shift to the outcome of the highly-anticipated two-day FOMC monetary policy meeting, scheduled to be announced during the US session on Wednesday.

Technical Analysis: Gold price finds some support near 50% Fibo. of June-December rally

From a technical perspective, the XAU/USD, for now, seems to have stalled its recent sharp pullback from an all-time peak touched last week near the 50% Fibonacci retracement level of the June-December rally. The said support is pegged near the $1,975 area and is followed by the 50-day Simple Moving Average (SMA), currently around the $1,967 region. Some follow-through selling might expose the very important 200-day SMA, near the $1,951 zone, below which the Gold price could slide to the $1,938-1,936 region, representing the 61.8% Fibo. level. The latter should act as a key pivotal point as a convincing break below might suggest that the commodity has topped out and shift the near-term bias in favour of bearish traders.

On the flip side, any meaningful recovery might now confront stiff resistance near the $2,000 psychological mark. A sustained strength beyond has the potential to lift the Gold price towards the $2,015 intermediate hurdle en route to the $2,029-2,030 supply zone. The next relevant barrier is pegged near the $2,045 region, which if cleared decisively will suggest that the corrective slide has run its course. The XAU/USD could then extend the momentum further towards the $2,070-2,071 area before aiming to reclaim the $2,100 round figure.

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Euro.


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