GOLD OUTLOOK & ANALYSIS
- Fed Chairman Powell increases his dovish bets.
- The US ISM services PMI and NFP will be in the spotlight next week.
- Overbought gold could fall next week.
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Basic XAU/USD forecast
Gold prices rose on Friday after the U.S. ISM manufacturing PMIs were disappointing, followed by less hawkish messages from Fed Chair Jerome Powell, potentially signaling the peak of the Fed’s rate-hiking cycle. Although Mr. Powell tried not to sound too dovish, the market paid no attention to the sentiment. The key statements include:
“The Fed funds are clearly in restrictive territory.”
“It is ‘premature’ to say that monetary policy is restrictive enough.”
“I expect spending and production to slow next year.”
From a money market perspective (see table below), interest rates are expected to be below 4 percent by December 2024. The recent spate of US economic data has contributed to this narrative, as has a collapse in US Treasury yields as the 2-year note approaches the 4.5% support level.
IMPLIED FED FUND FUTURES
Source: Refinitiv
Next week, the PMI data for the ISM services sector will come into focus. The more significant of the two PMI releases, as the US is primarily a services-based economy. Gold bears will watch a tad higher at 52, with the highlight of the week coming from the Non-Farm Payrolls (NFP). A strong NFP number could reverse the recent gold rally, while further support came from the restart of the Israel-Hamas war in Gaza. Following the recent ceasefire, precious metals’ appeal as a safe haven has been rekindled, and any escalation could cause prices to rise.
GOLDEN ECONOMIC CALENDAR
Source: DailyFX
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TECHNICAL ANALYSIS
GOLD PRICE DAILY CHART
Chart created by Warren Venketas, TradingView
The daily XAU/USD price action is likely to trend towards the March 2022 and May 2023 resistance zone around the 2081.82 level. The Relative Strength Index (RSI) is deep in overbought territory and could indicate a decline to the downside. However, bulls will look to the emerging golden cross formation that could extend the recent rally.
Resistance levels:
Support levels:
- 2048.79
- 2000.00
- 1987.42
- 1950.00
GOLD IG CUSTOMER SENSATION: MIXED
IGCS shows that retailers are currently net SHORT on GOLD, with 53% of traders currently holding long positions.
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Introduction to technical analysis
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DailyFX provides forex news and technical analysis on the trends affecting global foreign exchange markets.