The XAU/USD is trading closely to the $2,070 level, recording strong gains. This upward movement can be attributed to speculation of dovish bets towards the Federal Reserve (Fed), and the US Treasury yields remaining low. Additionally, markets are projecting as many as six Fed rate hikes in 2024, which has caused the US bond yields to decline. This has positively impacted the price of non-yielding metals, as bond yields are often viewed as the opportunity cost of holding them.
Furthermore, with the US Personal Consumption Expenditures (PCE) price index experiencing a significant drop in November, there is growing optimism for potential initial rate cuts from the Federal Reserve at the start of the new year. This comes after consecutive decelerating Consumer Price Index (CPI) readings and Fed officials forecasting 75 bps of easing in 2024, putting pressure on the US Dollar and bond yields.
In Thursday’s session, the US will report weekly Jobless Claims figures, which may fuel volatility in the USD and bond market dynamics.
On the technical side, the XAU/USD daily chart indicates a bullish inclination. The Relative Strength Index (RSI) is approaching overbought territory and the Moving Average Convergence Divergence (MACD) indicator shows increased buyer enthusiasm. The metal’s position above the 20, 100, and 200-day Simple Moving Averages (SMAs) confirms the dominance of buyers in the overall trend.
Support Levels: $2,060, $2,050, $2,030 (20-day SMA).
Resistance Levels: $2,081, $2,100, $2,115.
Overall, the XAU/USD is displaying strong bullish momentum, driven by speculation of Fed rate cuts and favorable market conditions for non-yielding metals. The decline in US bond yields has led to a positive impact on the price of gold. Investors should closely monitor upcoming economic indicators, such as the US Jobless Claims figures, for potential market volatility in the coming sessions.
