- Summary:
- The world’s second-largest economy is not out of the woods yet and its return to the market alongside US macro data favours gold price.
Gold price rose by 0.9 percent on Monday, going up for the second successive session to signal a potential breakout beyond the $2,600s territory. The safe haven metal rose to new weekly highs of $2,660 per ounce at the spot market, after Friday’s US Nonfarm Payrolls (NFP) and unemployment data failed to affirm the dollar’s strength.
China and US sentiment drive up gold prices
With the US labour market showing underlying weakness, there is an increased likelihood of an interest rate cut by the Federal Reserve next week. That would be the last rate cut under Joe Biden’s presidency, which could set the stage for significant shifts in US economic policies under Donald Trump. The uncertainty in the transition has generated some safe haven demand for gold, which is good for the price upside.
Also, gold price is supported by China’s return to the gold market. Official data released last week showed the country’s central bank purchased gold in November, after a six-month pause. The resumption of the purchase when the metal is about 13 percent above the levels in May sends a bullish signal for gold prices across the markets.
Also, China’s soft CPI data signals potential weakness in the world’s second-largest economy despite its economic stimulus measures. Headline consumer prices rose by 0.3 percent year-on-year in November, missing forecast target of 0.5 percent. That could add propulsion to gold prices due to concerns over the country’s economic growth rate.
Gold price prediction
Pivot: Gold price pivots at $2,655. The RSI indicator calls for further upside above this level.
Resistance: With the buyers in control, gold price will likely encounter the first resistance at $2,667. However, if the buyers extend their control, XAUUSD could break above that level and test $2,678.
Support: The first support will likely be at $2,645. That said, a stronger downward momentum could break below that level and invalidate the upside narrative. Also, such momentum could extend the downside and potentially test $2,637.
