November ended hesitantly for gold bulls as it closed around the 1220s level with a double golden cross between the 50-hour moving average (blue line) and 100-hour moving average (white line) as well as the 50-hour moving average and 200 moving average (yellow line). This reflected onto December when the bulls managed to create an upward trending channel, pushing gold from the 1220s to its highest levels since October breaching the 1240s level. However, the bears unleashed their claws with strong selling pressures, forcing gold to drop from the recent highs it posted.
The precious metal bounced back, taking the 1,242 level as a strong resistance. However, any bullish move breaching above this level could lift gold back to October’s high at 1,243, and even higher toward the 1,250s level.
Technically speaking, the RSI continues to register above 40 percent, which indicates that positive momentum is still being preserved for the past two days. The volatility of this shiny metal seems to be easing for a while as the RSI has been registering between the 40 and 60 percentages with some bullish bias, as shown by a slight break above 60 percent yesterday. Andrew’s Pitchfork (3 green lines) suggests that gold is in an upward channel, taking its lower and upper boundaries as strong support and resistance levels respectively.
The first resistance was created around the 1,240s level and the second could be around 1,243 all the way up to the 1,250s level. However, resting periods for the uptrend could be around yesterday’s support level at 1,234. A stronger decline could drag gold toward the 1,230s level.
A great boost in the US economy could create a tremendous selling pressure of which the bears would be able to drag down the safe haven to the 1,220s level and even to November’s low around the 1,196 level.
A strong US economy might amplify the USD buying confidence, making investors more likely to back away from the safe haven instrument for a while. With the current 90-day truce agreement in the US-China trade dispute, gold could find a resting period in consolidation.
However, a truce has not been legally confirmed nor finalized. As you may know, Trump’s moves cannot be anticipated. So, if he suddenly decides to break this truce, the trade war is back in full swing. So far, Trump’s words have not bolstered any confidence among investors, who are already worried about the trade war’s negative consequences, as they come to realize that this war is far from over.
Moreover, in Jerome Powell’s speech last week, when he mentioned that interest rates are “just below” their neutral range, he signaled a dovish tone, signifying that the FOMC will most likely ease the pace of rate hikes in 2019.
Therefore, high uncertainty currently has hold over the US market and bullishness might seem gold’s most-likely scenario. Such uncertainties will be the gold bulls’ incentive to overwhelm the bears with their buying pressures, pulling gold back up to the 1250s level or even beyond.