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Gold Price to Face Further Losses on Failure to Defend November Low

Gold Price to Face Further Losses on Failure to Defend November Low

David Song, Strategist

Gold Price Talking Points

The opening range for December is in focus for the price of gold amid the limited reaction to the recent US data prints, but the precious metal may face a further decline over the coming days if it fails to defend the November low ($1759).

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Gold Price to Face Further Losses on Failure to Defend November Low

The price of goldbounces back from the weekly low ($1770) in an attempts to retrace the decline following the testimony from Federal Reserve Chairman Jerome Powell, and bullion may consolidate over the coming days as it appears to be unfazed by the uptick in the ISM Manufacturing survey.

Image of DailyFX Economic Calendar for US

Nevertheless, the rebound in business sentiment may put pressure on the Federal Reserve to implement higher interest rates sooner rather than later as the ISM index climbs to 61.1 from 60.8 in October, and it remains to be seen if the central bank will adjust the forward guidance at its next rate decision on December 15 as Chairman Powell and Co. are slated to update the Summary of Economic Projections (SEP).

Until then, the price of gold may move to the beat of its own drum as the larger-than-expected uptick in the US Consumer Price Index (CPI)pushes market participants to hedge against inflation, and signs of stronger price growth may prop up the price of gold as longer-dated US Treasury yields struggle to retrace the decline from earlier this year.

With that said, the opening range for December is in focus for the price of gold as it attempts to recoup the losses from earlier this week, but bullion may face a further decline over the coming days if it fails to defend the November low ($1759).

Gold Price Daily Chart

Image of Gold price daily chart

Source: Trading View

  • Keep in mind, the negative slope in the 200-Day SMA ($1791) indicates that the broader trend for the price of gold remains tilted to the downside, with a ‘death cross’ formation taking shape in August as the Relative Strength Index (RSI) pushed into oversold territory.
  • However, lack of momentum to test the March low ($1677) generated a textbook RSI buy signal as the oscillator climbed back above 30, with the rally from the November low ($1759)pushing the indicator into overbought territory for the first time since July 2020.
  • Nevertheless, the overbought RSI reading was short lived, with the price of gold slipping back the Fibonacci overlap around $1837 (38.2% retracement) to $1847 (100% expansion) after clearing the September high ($1834) during the previous month.
  • Lack of momentum to hold above the $1816 (61.8% expansion) to $1823 (23.6% expansion) region brings the $1762 (78.6% expansion) to $1763 (50% retracement) area on the radar, with a break of the November low ($1759) opening up the September low ($1722).
  • At the same time, the price of gold may stage a near-term recovery if it continues to defend the November low ($1759), with the opening range for December in focus as bullion bounces back from the weekly low ($1770).

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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