The continuous decline in the price of the US dollar throughout last week’s trading was a catalyst for the XAU/USD gold bulls to move towards the psychological resistance level of $1800 an ounce. It reached the resistance of $1810 an ounce, the highest price of gold in five months. During the last trading session of last week, gold traded slightly higher on Friday, amid growing fears of a recession in the United States. Expectations that the Federal Reserve is ready to slow down with raising US interest rates.
In general, the US dollar remained affected, and Treasury yields fell, as investors await three decisions on interest rates from global central banks this week. Investors are also awaiting the US consumer price inflation announcement for additional clues about the pace of interest rate hikes. By the end of last week, the Labor Department said the US producer price index for final demand rose 0.3% in November, matching upwardly revised increases in October and September. Economists had expected producer prices to rise by 0.1% compared to the 0.2% rise originally reported for the previous month.
A report from the University of Michigan showed that one-year inflation expectations fell to a fifteen-month low of 4.6% in December from 4.9% in November, although five-year inflation expectations remained at 3%. The report said that the US consumer confidence index rose to 59.1 in December from 56.8 in November, while economists expected the index to decline to 53.3.
Official data showed that consumer prices in China rose 1.6 percent year-on-year in November, down from 2.1 percent in October. Producer prices fell at an annualized rate of 1.3%, versus expectations for a 1.4% decline. The Bank of England/Ipsos quarterly survey showed that the British public's expectations for inflation for next year eased to 4.8 percent in November from 4.9 percent in August.
US Stocks Show No Direction
The major indices moved significantly lower in late trading after spending most of the session bouncing back and forth across the unchanged line. Accordingly, the major indices ended the day far from their lowest levels in the session. The Dow Jones index fell 305.02 points, or 0.9 percent, to 33,476.46, the Nasdaq index fell 77.39 points, or 0.7 percent, to 11,004.62, and the Standard & Poor's 500 29.13 points, or 0.7 percent, to 3,934.38.
With the decline in the same session, the main indices recorded huge losses for this week. The Dow Jones fell 2.8 percent, and the S&P 500 and Nasdaq fell 3.4 percent and 4.0 percent, respectively. The weakness came late in the day in Wall Street markets as investors looked forward to this week's highly anticipated Federal Reserve meeting. While the Fed is widely expected to slow the pace of its interest rate hikes to 50 basis points, investors have recently expressed concerns about how much the Fed needs to raise interest rates in order to contain inflation.
XAU/USD gold price forecast today:
- The continuation of the XAU/USD gold prices rise above the psychological resistance at $1800 an ounce confirms the bulls' control over the general trend.
- The continuation of the momentum to move towards the resistance levels 1818 and 1833 dollars an ounce, confirming the strength of the trend.
- It will move the technical indicators towards overbought levels, from which selling may be technically the best trading strategy.
On the other hand, according to the performance on the daily chart below, the move of the gold price towards the $1775 support level will be important for the bears to start reversing downward. The gold market this week will be greatly affected by the monetary policy announcements of global central banks led by the US Federal Reserve and the reaction from the announcement of the results of US and British economic data.
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