Last week, gold prices hit the highest level in three weeks, hitting a high of $4,245 per troy ounce and closing just under the $4,200 mark. It spiked all over the place as the USD collapsed 10%. Wonderfully, this decline occurred just after the US government reopened thanks to a newly-floated funding bill. The funding will keep the lights on for the federal government through January 30, giving us a brief respite from fiscal uncertainty.
The rise she XAU/USD pair was mainly due to the dollars’ weakening. As market participants started to digest what all of this meant, the optimism began to fade during European trading hours. As a result, this caused a relief, resulting in gold prices dropping below the $4,200 threshold.
Speculators are focused on upcoming US economic data that could help shape the Federal Reserve’s expected monetary policy move in December. The expectations of these economic indicators have left the economic and trading environment very cautious. As they wait for additional clues from economic reports, worries over the effects on interest rates continue to worry.
Gold’s deteriorating technical indicator picture is another sign of a longstanding bearish gold market. The Momentum indicator is just beginning to lose some strength above the 100 line. This indicates that the heavy lifting may be done on that positive trend. The Relative Strength Index (RSI), a technical indicator used to signal overbought and oversold conditions in a market, has relaxed from overbought territory and is at 66. Counterintuitively, this healthy figure raises an alarm about overextension as buyers still completely control the market.
Immediate support for gold prices comes from the 20-day Simple Moving Average (SMA) currently at $4,164. This moving average is still above both the 100- and 200-day SMAs, signaling a long-term bullish trend. As mentioned last week, gold has to hold above this support level. As long as it holds above the increasing 20-period SMA, its short-term uptrend will stay on track.
Market analysts are intensely focused on gold’s piercing top to bottom price range. They’re particularly watchful as the United States stands to release impactful, influential economic data. These reports are sure to move commodity traders and macroeconomic policy expectation substantially. The interplay between gold prices and the US Dollar will be a focal point as traders assess their positions in anticipation of market shifts.