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XAU/USD Current price: 1,982.29
- US Dollar extends its positive momentum, with XAU/USD trading at fresh December lows.
- Looming central banks’ decision and the US Consumer Price Index to set the market tone.
- XAU/USD bearish case became stronger after the pair pierced the $2,000 threshold.
Spot Gold extends its slide on Monday, after losing the $2,000 threshold following the release of the United States (US) Nonfarm Payrolls (NFP) report last week. The US dollar surged after a stronger-than-anticipated report, although for the wrong reasons. Market participants did not buy the USD on the back of confidence in the Greenback’s strength but as a safe due to fresh concerns about the future of the monetary policy and how it could affect the economy.
The US Federal Reserve (Fed) has left interest rates on hold in its last two meetings, claiming previous actions need time to take effect. But there is a non-spoken reason: higher rates come with an increased risk of an economic setback. Growth in the country has proved resilient, yet policymakers are well aware a soft-landing is around the corner. Inflation has eased sharply from the records achieved in mid-2022, but it is still above the central bank’s 2% goal.
Finally, for inflationary pressures to remain subdued, the labor market needs to be more loose. That’s precisely the opposite of what the NFP report showed, as the Unemployment Rate shrank to 3.7% in November. The US Unemployment rate stood between 3.4% and 3.9% throughout 2023. Such a decline keeps the door open for another rate hike, which increases the odds of a recession.
Answers may come this week as the US will release the November Consumer Price Index (CPI) on Tuesday, while the Fed will announce its monetary policy decision on Wednesday, alongside fresh economic projections.
XAU/USD short-term technical outlook
XAU/USD is sharply down for a second consecutive day and seems poised to extend its slump. Technical readings in the daily chart reflect the strong selling interest after the pair broke below a bearish 20 Simple Moving Average (SMA), which anyway maintains its bullish slope. The longer moving averages lack directional strength far below the current level, establishing a target zone between $1,930 and $1,950. Finally, technical indicators gain downward traction and crossing their midlines into negative territory, in line with lower lows.
In the near term, and according to the 4-hour chart, the risk also skews to the downside. XAU/USD accelerated its slump after breaking below a flat 200 SMA, while the 20 SMA crosses below the 100 SMA above the larger one, another sign of increased selling interest. Technical indicators, in the meantime, head firmly south around oversold readings without signs of downward exhaustion. Gold bottomed at $1,976.26 on November 20, the level to break to confirm a bearish continuation in the upcoming sessions.
Support levels: 1,976.26 1,959.40 1,946.00
Resistance levels: 1,994.40 2,001.70 2,014.20
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