gold-market-outlook-technical-fundamental-analysis

This week’s Gold report, is somewhat significant as to the reason it is the last one before the end of the year but also, the details included give some indication of what could follow in the next months.

Starting from the US, through his personal tweeter account, the US president said that China wants to make a huge deal with the US and confirmed, that their side is also interested, as the deal could happen.

It is not clear if China is making a move out of desperation or if they have finally brought up a plan that could work in favor of both sides and for the general public.

If the US president is confident the deal could be signed, stresses encountered earlier with the dispute, can now be relieved as the road could be paved for a solution.

Gold prices could react to such a scenario with a significant portion of risk lifted but further analysis should be undertaken from a US economy perspective, in order to form a more comprehensive opinion.

On the contrary, some damage to Asian economies has been confirmed in the previous days by the IMF, stating that the US Sino issue has had a negative impact and warned that the fund could further cut its global growth forecasts, in January.

So, uncertainty is knocking the door with the IMF statements due to investment being much weaker than expected.

On another front last week the US bond market was in the spotlight as the 3 year Treasure yield surpassed the 5 years and the 2 year Treasury yield was very close to the 10 years.

Analysts pay specific attention to bond yields movements, as throughout history their volatility was evident during harsh economic times or just before economic crisis.

Not that the past will define the future but rather a relation of this event with the messages it could be sending for the short term mostly.

A more clear explanation of what happened is that mid short term -maturity bond now pays more than the mid long term-maturity bond, suggesting investors believe the government is less likely to service the debt it owes in three years than in five years.

At the same time, 10-year yield and 2-year yield which indicate short term and long term return are somewhat flat which indirectly supports the previous conclusion.

Investors demand for the precious metal could increase significantly in the next months if the yields do not return to more normal levels.

Yesterday, Gold prices dropped after the Federal Reserve raised interest rates, on a widely anticipated decision.

Analysts and market participants were surprised with the Fed’s commitment to retain the core of its plan to tighten monetary policy.

Prior to the announcement, Bullion prices had risen to six-month highs.

However, after the rate hike announcement, pressure was put on gold and the precious metal corrected some 10 dollars below the rise it had initially made.

The precious metal remains somewhat exposed for the next days until the end of the year, but also for the next months as the FED may slow down interest rate hikes.

However, according to yesterday’s price reaction, Gold displayed strong reaction to the FED decision and accompanying statement.

In addition, the Fed did not directly state its futures plans, but said they would increase interest rates, although on a slower pace.

Gold reacts to any news regarding rising interest rates, as traders prefer other instruments that appreciate in value from yielding rates.

Gold 1 Hour chart

Yesterday, provided much activity for XAUUSD price as the 1250.79 (R1) resistance level was breached prior to the FED decision.

It adds to the view that technically the precious metal could be on a rise and making a gradual comeback.

If the bulls prevail, XAUUSD prices could breach our 1250.79 (R1) resistance level and head higher for the 1259.78 (R2) resistance level and even pass it aiming for the (R3) 1268.88 resistance level.

If the bears dominate the price action then XAUUSD could drop below the 1241.18 (S1) support level and aim for the 1232.93 (S2) Support barrier.

At the moment, XAUUSD is moving between our 1250.79 (R1) resistance level and our 1241.18 (S1) support level in a sideways motion.

Please note that XAUUSD had moved within this price range, during the past trading week and most of December.