Gold: Limited Bounce or Upside Resumption?
The initial reaction to the decisive November 5th Donald Trump Presidential election victory led to selling of long gold positions which were being held as a hedge against a delayed or contested result. This selling was strong enough to prompt a more prolonged setback, as over-extended upside conditions were unwound.
The decline saw prices drop by $253 in just 11 sessions and produced tests of an important support zone between 2535/76, where both the rising weekly Bollinger mid-average, and 50% retracement of May 2024 to October 2024 strength were located.
This area was successful in holding gold price weakness and last week’s escalation of geopolitical risks in Ukraine were the catalyst to produce fresh strength, which ensured a close above 2693 (62% Fibonacci retracement of latest weakness), last Friday.
Gold: Geopolitics, FOMC Minutes and US PCE Inflation in Focus This Week
At the start of next week, events in Ukraine are likely to still impact gold prices, but there is also some event risk from the release of the minutes from the last Fed meeting on Tuesday at 1900 GMT, and then the US PCE Index, the Fed’s preferred inflation gauge on Wednesday at 1330 GMT.
With a lot of uncertainty surrounding whether the Fed cuts interest rates again at its final meeting of 2024 on December 18th, these updates could have some bearing on whether Gold retraces some of last week’s 6% rally or extends its up move further.
Chart Levels in Focus This Week
Upside:
From a technical standpoint, while not a guarantee of future price moves, the hold and rally from mid-average support (currently 2572 Weekly Chart) may see a resumption of upside themes, depending on future market conditions. If further upside is to emerge, the potential may be for moves back to the October 30th all-time high at 2790. However, this high has the potential to be a strong resistance level as it links with 2802, which is the 262% Fibonacci extension of the March 2022 to September 2022 sell-off.
If this resistance zone was broken on a closing basis, it would see gold again hit new all-time highs. Although gauging the next resistance in new higher ground can be difficult, one possible resistance, if an upside extension does materialise, could be 2976, which is equal to the higher 300% Fibonacci extension.
Downside:
To the downside, $2535/72 is the support focus from the weekly chart, and closing breaks, if seen, may result in the potential for further downside moves. This may include tests of support at 2475, which is the deeper 62% retracement, and if this gives way, possibly towards the July 2024 low at 2354.
Of course, breaks of support or resistance levels are based on hypothetical scenarios and while previous breaks of similar levels may have resulted in further price movements, past performance is not indicative of future results.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
The decline saw prices drop by $253 in just 11 sessions and produced tests of an important support zone between 2535/76, where both the rising weekly Bollinger mid-average, and 50% retracement of May 2024 to October 2024 strength were located.
This area was successful in holding gold price weakness and last week’s escalation of geopolitical risks in Ukraine were the catalyst to produce fresh strength, which ensured a close above 2693 (62% Fibonacci retracement of latest weakness), last Friday.
Gold: Geopolitics, FOMC Minutes and US PCE Inflation in Focus This Week
At the start of next week, events in Ukraine are likely to still impact gold prices, but there is also some event risk from the release of the minutes from the last Fed meeting on Tuesday at 1900 GMT, and then the US PCE Index, the Fed’s preferred inflation gauge on Wednesday at 1330 GMT.
With a lot of uncertainty surrounding whether the Fed cuts interest rates again at its final meeting of 2024 on December 18th, these updates could have some bearing on whether Gold retraces some of last week’s 6% rally or extends its up move further.
Chart Levels in Focus This Week
Upside:
From a technical standpoint, while not a guarantee of future price moves, the hold and rally from mid-average support (currently 2572 Weekly Chart) may see a resumption of upside themes, depending on future market conditions. If further upside is to emerge, the potential may be for moves back to the October 30th all-time high at 2790. However, this high has the potential to be a strong resistance level as it links with 2802, which is the 262% Fibonacci extension of the March 2022 to September 2022 sell-off.
If this resistance zone was broken on a closing basis, it would see gold again hit new all-time highs. Although gauging the next resistance in new higher ground can be difficult, one possible resistance, if an upside extension does materialise, could be 2976, which is equal to the higher 300% Fibonacci extension.
Downside:
To the downside, $2535/72 is the support focus from the weekly chart, and closing breaks, if seen, may result in the potential for further downside moves. This may include tests of support at 2475, which is the deeper 62% retracement, and if this gives way, possibly towards the July 2024 low at 2354.
Of course, breaks of support or resistance levels are based on hypothetical scenarios and while previous breaks of similar levels may have resulted in further price movements, past performance is not indicative of future results.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
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