GOLD (XAU/USD) PRICE FORECAST:
MOST READ: USD/JPY Price Forecast: Guarded BoJ Leaves Yen on Offer
Gold prices resumed their ascent following the Christmas break as Geopolitical concerns continue to accelerate. The precious metal rose about 0.7% on the day as safe haven demand continues to grow.
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LOW VOLUME AND LIQUIDITY MIGHT HAMPER UPSIDE
Geopolitical tensions have ratcheted up safe haven appeal from market participants with US data ahead of the Christmas break doing little to offer the US Dollar support. The lack of volume and liquidity this week could be a saving grace for Gold bears as it may limit the upside move.
The renewed US Dollar weakness came about following a host of misses but US data in the week before Christmas. This has led to market participants remaining dovish on US rates in 2024 and thus weighed on the US Dollar.
Looking ahead and there is obviously a lack of catalysts this week and with muted volume expected the chance of rangebound trade looms large. The surprise following the Christmas break has come in the form of US Equities continuing their rally which is in contrast to the safe haven demand being experienced by Gold. However, this shouldn’t come as a complete surprise as US Equities for a while now have been disconnected from the consensus view by market participants. This was most evident in 2023, where with a host of downside risks, US Equities surprised and continued their advance.
US Treasury Yields continue to tick lower as you can see on the chart below. The 2Y and 10Y yields continuing their downward trajectory as rate cut bets ramp up.
US2Y and 10Y Daily Chart
Source: TradingView, Chart Prepared by Zain Vawda
US DATA AHEAD
The lack of US data this week is likely to keep the US dollar on the back foot ahead of 2024. The DXY hovers near 5 moth lows with further downside appearing more and more likely.
At the moment fears of further strife and escalation in the Middle East as well as general market sentiment are likely to drive prices moving forward.
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TECHNICAL OUTLOOK
GOLD
Form a technical perspective, Gold is looking bullish at present, but a lack of liquidity and volume could hamper a break of the $2080/oz resistance level. Given the extended upside rally thus far, i think a daily candle close above the $2074 level, which would provide bulls with further impetus.
Any knee-jerk move on geopolitical tension may fade quickly as we saw when Gold printed fresh all-time highs. Geopolitical tensions are likely to remain the key driver for the rest of this week and is the only thing in my opinion that could push price above the $2080/oz area.
Key Levels to Keep an Eye On:
Resistance levels:
Support levels:
Gold (XAU/USD) Daily Chart – December 27, 2023
Source: TradingView, Chart Prepared by Zain Vawda
IG CLIENT SENTIMENT
Taking a quick look at the IG Client Sentiment, Retail Traders are Overwhelmingly Long on GOLD with 58% of retail traders holding Long positions. Given the Contrarian View to Crowd Sentiment Adopted Here at DailyFX, is this a sign that Gold may struggle to break above the $2080/oz resistance level?
For a more in-depth look at Gold client sentiment and tips and tricks to use it, download the free guide below.
| Change in | Longs | Shorts | OI |
| Daily | 2% | 7% | 4% |
| Weekly | -6% | 20% | 3% |
Written by: Zain Vawda, Markets Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda