. Gold's Tactical Timeout: A Closer Look at the Post-Rally Rate Cut Buzz

Gold’s Tactical Timeout: A Closer Look at the Post-Rally Rate Cut Buzz

Gold’s Tactical Timeout: A Closer Look at the Post-Rally Rate Cut Buzz

04 Dec 2023

Gold Takes a Pause Following its Record Rally Amidst Speculation of Rate Cuts.

FUNDAMENTAL OVERVIEW:

Gold Retreats from Record High as Confidence Grows in Early 2024 Rate Cuts by U.S. Federal Reserve

After reaching a historic peak on Monday, gold experienced a slight dip amid increasing certainty that the U.S. Federal Reserve would implement interest rate cuts in the early months of the coming year, effectively maintaining the precious metal comfortably above $2,000.

As of 1036 GMT, spot gold slipped approximately 0.1% to $2,068.39 per ounce, and U.S. gold futures also saw a 0.1% decline, reaching $2,087.20. The sentiment remains positive for gold, with expectations of continued upward movement if signs of low-interest rates persist in the next year.

Alexander Zumpfe, a precious metals trader at Heraeus, noted, “The sentiment for gold is positive,” despite technical indicators suggesting a potential overheating in the market. While short-term profit-taking might occur, the overall outlook for gold remains strong.

The dollar index edged up 0.2%, impacting gold’s gains by making it more expensive for holders of other currencies. In the Asian session, gold had surged nearly 2% to a record high of $2,111.39, driven by renewed expectations of a rate cut following comments from Federal Reserve Chair Jerome Powell.

Traders are currently pricing in a 70% chance of a rate cut by March, according to CME’s FedWatch Tool. Lower interest rates diminish the opportunity cost of holding gold, which does not yield interest.

Despite the potential for short-term fluctuations, some analysts, like UBS, express confidence in gold, anticipating a dip below $2,000/oz in the near term but forecasting a target of $2,250/oz by the end of 2024.

Comex gold speculators raised their net long position, reaching 144,410 contracts, a boost of 29,517 contracts in the week ending November 28, according to data from the Commodity Futures Trading Commission.

As traders await U.S. non-farm payroll numbers on Friday, seen as crucial in gauging the interest rate outlook, other precious metals experienced fluctuations. Silver slipped 1.1% to $25.14 per ounce, palladium fell 2% to $979.94, and platinum dipped 1.1% to $923.01.

Technical Overview

  • Moving Averages: Exponential and Simple moving averages signal bullish trends.
  • RSI (Relative Strength Index): 74.43 indicates a sell zone, suggesting a bearish trend.
  • Stochastic Oscillator: 81.71 falls in the neutral zone, indicating a neutral trend.
  • Resistance and Support Levels: Bullish sentiment with a suggested buy at $2070.

Trade Suggestion:

  • Limit Buy: $2070
  • Take Profit: $2084
  • Stop Loss: $2065