- Gold futures continued to decline on Tuesday, after hitting an all-time high last week.
- Recently, the precious metal saw a notable reversal, driven by a rise in the US dollar.
- Despite expectations that the US Federal Reserve will ease monetary policy, gold prices XAU/USD were unable to maintain their upward momentum.
- Currently, Gold prices XAU/USD are trading around $2,028 per ounce, waiting for any new developments that will determine the direction of gold for investors.
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In general, gold prices XAU/USD rose by more than 1% last week, adding to their gains since the beginning of the year of 11%. Recently, Gold had hit an all-time high of $2,095.70 on Friday and surpassed $2,135 in overnight trading on Monday before losing more than $100. Also, Silver prices fell, the sister commodity of gold, and retreated to $24.515 per ounce. Moreover, Silver prices had stabilized above $26 before falling. Since the beginning of the year, silver prices have risen by 1.3%.
So, if the US Federal Reserve is expected to cut interest rates early next year, and there are tensions in the Middle East, why is gold not maintaining its momentum?
Clearly, there are many factors that could explain this significant decline. Firstly, gold market conditions were in the overbought area, where the relative strength index (RSI) was above 70 before the dramatic rise. Secondly, the investors took profits while retail traders chased gains. Meanwhile, the last contributor may be the return of the dollar.
The US dollar index (DXY), a measure of the US currency against a basket of other major currencies, rose to 104.00 on Tuesday. The DXY index has risen by 1.25% over the past week and by 0.5% on an annual basis. As is well known, the strength of the US dollar is bearish for commodities priced in dollars because it makes them more expensive for foreign investors.
Meanwhile, on the economic data front, the US labor market continues to slow, with job openings falling to 8.733 million in October, down from 9.35 million in September. The S&P Global Composite and Services Purchasing Managers' Index remained relatively stable in November. The purchasing managers' index for supply chain management services rose to 52.7 last month.
As for other metal markets, copper futures fell to $3.788 per pound. Also, Platinum futures fell to $905.40 per ounce. Similarly, palladium futures fell to $946.00 per ounce.
Gold price forecast for today:
According to the performance on the daily chart below, gold prices XAU/USD are still on an upward general trend. As we mentioned before, the psychological resistance of $2,000 per ounce will remain a confirmation of the strength and dominance of the bulls on the trend. Now, Gold prices may remain on their current path until the reaction to the announcement of US employment figures, which will have a strong and direct reaction to the future of the US central bank's tightening policy and, therefore, to the US dollar. Furthermore, weak US figures could allow gold to move higher and hit the next resistance levels of $2,060 and $2,085 again. On the other hand, if the figures are stronger, the dollar may find an opportunity to complete the current correction and thus lose the gold peak of $2,000 per ounce. The next most important support level at that time will be the $1,985 per ounce level.
Obviously, the broader trend in gold is still upward, the inability to maintain momentum and the sudden reversal are two sources of concern from a chart perspective, painting a picture of a blown-off top. Therefore, further declines cannot be ruled out. In this case, the focus could shift to the $2,008 area. Finally, the performance of gold will be determined by a combination of geopolitical factors, the path of interest rates, direct central bank purchases, and how the economic landscape develops.
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