Gold Consolidates Below $1,788: What Could Trigger a Sharp Decline?
- Gold prices surged on the back of increased safe-haven appeal in the market, after US consumer prices were elevated
- US Treasury yields fell after data showed that the US CPI increased further in November, implying the largest annual gain since 1982
- The XAU/USD is trading at $1,786, having been rejected below the resistance level of $1,788
Gold prices closed at $1,784.80, after placing a high of $1,791.00, and a low of $1,770.40. On Friday, the gold prices surged on the back of increased safe-haven appeal in the market, after US consumer prices were elevated. Furthermore, gold was also boosted because of the cooled-down bets on interest rate hikes, as the inflation jump was not as big as expected. Analysts believed that the latest inflation report released on Friday was not as hot as some were projecting, which should keep the US central bank interest rate increases between 2 and 3 hikes in the next year.
US Treasury yields dropped after the release of data showing that the US CPI had increased
Gold was also gaining strength from a slip in the dollar, which increased its appeal for overseas buyers. US Treasury yields fell after data was released, which showed that the US CPI increased further in November, implying the largest annual gain since 1982. The increased gasoline prices pushed the consumer price index higher, which had a negative impact on the US dollar.
The report from the Labor Department on Friday was followed by a series of data releases this month, showing a rapidly tightening labor market. This raised expectations that the Federal Reserve will announce an accelerated winding down of its massive bond purchases at its monetary policy meeting next week. Chances of high levels of inflation lasting longer have been increased, due to minor signs of easing in the supply bottlenecks, while companies were increasing wages to compete for scarce workers. Biden’s approval rating is being hurt by the increased cost of living and shortages caused by the relentless COVID-19 pandemic. However, the White House and the Federal Reserve have characterized inflation in the US as being transitory.
US Consumer Price Index has accelerated by about 6.8%
The US Consumer Price Index accelerated by about 6.8% this year, through November – this was the most significant year-to-year advance since June 1982. The high inflationary pressures depicted by the CPI report somehow fell short of market expectations and boosted gold, which pushed its prices up on Friday. Meanwhile, the US Dollar Index, which measures the value of the greenback against a basket of six major currencies, fell to 95.98 on Friday, adding further to the gains in the yellow metal. The US Treasury yield on the benchmark 10-year note also dropped, coming in at 1.45%, and dragging the greenback further down, which had a positive impact on the gold prices for the day.
Outlook on economic events
At 18:30 GMT, the CPI report came in, showing a surge to 0.8%, against the forecast of 0.7%, which supported the US dollar. The core CPI remained flat with expectations of 0.5%. At 20:00 GMT, the Prelim UoM Consumer Sentiment surged to 70.4, against a projected 67.9, which lent support to the US dollar. The Prelim UoM Inflation Expectations remained unchanged at 4.9%. At 23:52 GMT, the Federal Budget Balance was released. It dropped to -191.3B, against the expected -195.0B, weighing on the US dollar. Most of the macroeconomic data released on Friday supported the dollar, further capping the gains in the yellow metal.
Gold (XAU/USD) Daily Technical Levels
Support Resistance
1,782.46 1,785.16
1,781.13 1,786.53
1,779.76 1,787.86
Pivot Point: 1,783.83
Gold price forecast – Downward trendline to extend resistance at $1,788
The XAU/USD is trading at $1,786, having been rejected below the resistance level of $1,788. On the 2-hour timeframe, the downward trendline is acting as key resistance for gold at $1,788. This pushed gold prices lower, to the $1,782 support level.
A spike in demand at this point could slice through gold above the $1,788 level, until the $1,793 and $1,799 levels. Likewise, a downward breakout of the $1,782 level would expose the metal to the $1,774 mark. The RSI and Stoch RSI are holding above 50, which is indicative of an uptrend. Let’s consider taking buy trades over 1,782, until 1,788 or 1,793. Good luck!
ABOUT THE AUTHOR
See More
Sidebar rates
Related Posts
Save
Join 350 000+ traders receiving Free Trading Signals
Alerts
Rates
Calendar
Signals