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Gold remains moderately bid on hopes that rate hikes are over

December 7, 2023

NEW YORK (December 7) Gold price (XAU/USD) keeps a mild buying tone in Thursday’s early European session, with price action approaching the top of the last few days’ trading range.

Investors are increasingly confident that the major central banks’ tightening era is over and speculation that rate cuts might come before previously thought is keeping bullion sellers in check.

The Federal Reserve (Fed) is widely expected to leave rates on hold at their monetary policy meeting next week, with the market  pricing in a 50% chance that rate cuts will start in March Next year.

Investors expect the European Central Bank (ECB) to stand pat on December 14 and to cut rates by 150 points next year, starting in March.

Earlier this week, the Bank of Canada (BoC) and the Reserve Bank of Australia (RBA) hit the pause button, adding to evidence that the tightening cycles are coming to an end.

In the macroeconomic domain, Thursday’s ADP Employment data confirmed that the US labor market is loosening. The focus is now on Friday’s Nonfarm Payrolls report to confirm that view. 

Daily Digest Market Movers: Hopes of rate cuts and lower US yields keep Gold buoyed

  • US ADP Employment data confirmed that the labor market is loosening and bolstered hopes that the Fed might be forced to cut rates ahead of schedule.
  • Investors are now looking at Friday’s Nonfarm Payrolls. Another downbeat reading here might boost hopes of Fed rate cuts in early 2024 which would push Gold higher.
  • The CME Group Fed Watch tool prices a 99% chance that the Fed will hold rates next week and a 50% probability of a 25 bps rate cut in March 2024.
  • Moody’s warning to China’s debt credit rating has reactivated fears about the stability of the world’s second-largest economy, weighing on market sentiment and providing additional support to the safe-haven gold.
  • The US Dollar has pulled back from Wednesday’s highs, as US yields remain depressed at three-month lows although it remains on track to a significant weekly recovery.
  • On the docket today, US Weekly Initial Jobless Claims, are expected to have increased from 218K to 222K during the week of December 1, adding to the narrative of a softer US labor market.

Technical Analysis: Gold prices consolidate with resistance at $2,040 limiting bulls

The technical picture shows the XAU/USD pair looking for direction, moving within a narrow range, supported above the key $2,000 level, yet unable to find any meaningful acceptance when it approaches the $2,040 level.

A look at the four-hour chart and we see price action capped below the 50-period SMA. The RSI wavering around the 50 line, which suggests a lack of clear direction with investors awaiting the release of Friday’s Nonfarm Payrolls report.

From a wider perspective, the longer-term bullish trend from early October lows remains intact.

Immediate resistance remains at $2,040, which guards the path towards $2,067, ahead of the record-high $2,150. On the downside, a confirmation below $2,000 would negate the bullish view and add bearish pressure towards $1,950 and $1,932.


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