Gold price rebounds from oversold, pay attention to US economic data

2024-12-19 1156

On Thursday (December 19th) during the Asian session, spot gold rebounded and fluctuated, hitting $2618.02 per ounce at one point and currently trading around $2613.5 per ounce. Overnight, the hawkish Fed cut interest rates, and Powell's hawkish speech was stronger than market expectations. The US dollar index surged to a two-week high, and the 10-year Treasury yield also rose to a near six-month high, causing gold prices to fall to around $2583 at one point.

After the sharp decline, there is some demand for a rebound in gold prices, partly due to short-term short positions taking profits after the hawkish interest rate cuts by the Federal Reserve, and partly due to buying on dips to support gold prices. Due to Trump's tariff threat, uncertainty in policy prospects, and geopolitical instability, gold prices still provide safe haven support.

The main advantages of the fundamentals are

Geophysical situation: the Russia-Ukraine conflict continues, and the Middle East war continues

US Secretary of State Antony Blinken: Russia's further attacks have made Ukraine's entry into NATO a key security guarantee, although this is not the only way out.

The Israeli military announced on Thursday that it has carried out precise strikes on military targets of the Houthi militants in Yemen, including the port and energy infrastructure in the Yemeni capital Sana'a

Trump related factors: tariff threat, uncertain policy outlook

US President elect Trump called on lawmakers on Wednesday to veto a temporary bill aimed at keeping the government funded until Friday, increasing the likelihood of a partial government shutdown.

US third quarter current account deficit hits record high, economists warn of double deficit threat

Affected by strong import growth and reduced revenue, the US current account deficit increased by $35.9 billion or 13.1% in the third quarter, reaching a record high of $310.9 billion. Some economists warn that this is a potential threat for a country that is already burdened with a huge government budget deficit. In fiscal year 2024, the US budget deficit increased to US $1.833 trillion, the highest level outside the COVID-19 epidemic period, an increase of 8% over fiscal year 2023.

The US stock market fell sharply on Wednesday, with all three major stock indices experiencing their largest daily declines in months. Most global stock markets followed suit, driving up demand for gold as a safe haven.

Previously, the Federal Reserve lowered interest rates by 25 basis points, but its forecast hinted at a more cautious easing path next year, disappointing some investors. The Dow Jones Industrial Average fell 1123.03 points, or 2.58%, to 42326.87 points; The S&P 500 index fell 178.45 points, or 2.95%, to 5872.16 points; The Nasdaq Composite Index fell 716.37 points, or 3.56%, to 19392.69 points.

COMEX's gold holdings have increased for seven consecutive trading days, rising from 178278.42 hundred ounces to 192599.48, an increase of about 8%, indicating that institutions may continue to buy gold on dips.

The main bearish fundamentals

The hawkish Fed cuts interest rates, and the market expects that the Fed may cut interest rates once next year

The Federal Reserve lowered its policy rate range by 25 basis points to 4.25% -4.50% as expected on Monday, but Chairman Powell stated that further cuts in borrowing costs depend on further progress in reducing stubborn high inflation. This statement indicates that decision-makers are beginning to consider the prospects of comprehensive economic reform after the Trump administration takes office. Powell's clear and repeated mention of the need for caution has prompted the market to adjust its estimate of the possible decrease in borrowing costs over the next year.

Federal Reserve policymakers now expect to cut interest rates only twice, each by 25 basis points, by the end of 2025. The market expects that the Federal Reserve may only cut interest rates once in 2025.

Hamas: Phased release of detainees and significant progress in ceasefire negotiations

On the evening of December 18th local time, according to an anonymous Hamas official, significant progress has been made in negotiations between the Palestinian Islamic Resistance Movement (Hamas) and Israel regarding the phased release of detainees and a ceasefire agreement. The official said that in the first phase of the ceasefire agreement, Israel demanded Hamas to release 34 Israeli detainees for humanitarian reasons, mainly all remaining women and children, including Israeli female soldiers, as well as patients and the elderly. In response, Israel will release an unconfirmed number of Palestinians detained by the Israeli side for security reasons, including some prisoners sentenced to life imprisonment. The official claimed that the first phase of the ceasefire agreement will last for 42 days, during which Israel will allow a large amount of humanitarian aid, as well as equipment needed for repairing and rebuilding hospitals and public facilities in the Gaza Strip, to enter the Gaza Strip. The official stated that Israel has also agreed to withdraw from densely populated areas in the Gaza Strip in the first phase of the agreement. He also added that although all parties agreed to reopen the Rafa border crossing with Egypt in the first phase of the agreement, the issue of who will control the crossing has not yet been resolved.

SPDR holdings slightly decreased to 863.9 tons, with a previous value of 864.19.

Technical aspect

Daily level: Gold prices closed below the previous one month low of November 26th low 2605.13 on Wednesday, with key support from the 100 day moving average also near this level. It also fell below multiple supports such as the 2600 level and the 38.2% retracement level 2598 of the 2286-2790 rally, with MACD and KDJ dead crosses running. The bearish signal in the future has significantly strengthened, and it may once again drop to support the November 14th low of 2536.68, or even the 200 day moving average of 2470. The 61.8% retracement level of the 2286-2790 rally is also near this level.

Although the gold price rebounded within the day and has confirmed its retracement to the low point of 2613.55 on December 6th, if it cannot close above that level, the market will still lean towards a downward trend in the future; The resistance of the 5-day moving average is around 2629.11, which can also be referred to as the low point of 2627.51 on December 9th. The resistance of the 21-day moving average is around the 2650 level. If it can strongly recover from this position, it will weaken the bearish signal in the future.

Resistance: 2620.89;2624.31;2627.51;2632.99;2642.06;2650.48

Support: 2603.24; 2600.00; 2696.13; 2692.72; 2686.31; 2680.31;

Market Focus: Changes in the number of initial jobless claims in the United States, final US GDP for the third quarter, Bank of England interest rate decision, US November PCE data (Friday), geopolitical news, further market interpretation of the Federal Reserve's decision, global stock market performance.

Conclusion: There are still supporting factors in the fundamentals, and there is an opportunity for a rebound adjustment after the gold price oversold. However, the latest news on fundamentals is bearish, and the outlook for US data is bearish on the gold price. The technical outlook is bearish, and caution should be taken against further downside risks if the rebound is hindered.

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