Gold Outlook: Gold’s upward movement interrupted

Compare to last report , Gold’s price corrected heavily lower on Monday relenting most of last week’s gains. In today’s report we intend to have a look at the interruption of the negative correlation of the USD with gold’s price, geopolitical issues, Trump’s intentions and the release of the Fed’s November meeting minutes, all on a fundamental level for the gold market. For a rounder view, we conclude the report with a technical analysis of gold’s daily chart.

The negative correlation of gold with the USD interrupted

The negative correlation of gold with the USD, seems to have been interrupted over the past week. It’s characteristic that the USD rose over the past week, similar to the rise of gold’s price, while gold’s price since yesterday has been falling, while the USD Index remains relatively static.

The movements of the two trading instruments if contrasted imply a de facto interruption on the negative correlation of the two trading instruments which may be continued in the coming week. Such an interruption could be implying that fundamentals leading gold’s price, are elsewhere.

Another interesting factor to watch out for would be the path of US bond yields. In the past week, US yields tended to be in the rise, on Monday dived lower and their movement thus also implies that any negative correlation with the path of gold’s price was interrupted.     

Trump’s intentions for tariffs could

Trump’s pick for the Treasury Secretary, Scott Bessent, 62, hedge fund manager, may have been the main headline over Trump’s picks in his new Government, in the past week. The nominee seems to be a more mainstream choice, less controversial and Wall Street likes him. He is considered a good ally in Trump’s ideas for further deregulation of the markets and easing corporate taxation, yet it’s also going to be interesting to see his potential influence in Trump’s intentions to slap tariffs on US imports.

We note that Bessent was reported to be a supporter of a stronger USD, thus in turn may prove to be also a supporter for tariffs on US imports. Overall we see the case for the pick of Bessent to ease the markets’ worries for Trump’s economic policies, thus could create some safe haven outflows for the precious metal.

On the other hand, the announcement by Trump that on the first day in office we will be applying 25% tariffs on imports from Mexico and Canada and charging also additional 10% tariffs on imports from China could renew market worries and thus support gold’s price. We may see Trump’s tariff threats having a wider effect on the markets in the coming days. 

Easing geopolitical tensions may weigh on gold’s price  

The possibility of a ceasefire between Israel and Hezbollah, in Southern Lebanon, may have contributed further to the weakening of gold’s price yesterday. It’s characteristic that media mentioned the possibility off the US and France announcing a ceasefire deal as White House national security spokesperson John Kirby said, “We’re close” but “nothing is done until everything is done”, while the French Presidency stated that discussions on a ceasefire had made significant progress.

Yet it remains to be seen whether the two main parties are to accept such aa ceasefire deal. We tend to view Hezbollah may be near to such a deal, yet we still maintain worries for Israel. The Israeli far right may consider such a deal as a retreat and thus apply substantial pressure on Israeli Prime Minister Netanyahu to reject it. On the flip side Netanyahu is getting pressure to accept the deal especially from the US.

Should a ceasefire deal be achieved, we expect further safe haven outflows to weigh on gold’s price and vice versa, should the effort for ceasefire deal fail, we may see increased support for gold.

The release of the Fed’s November meeting minutes

Despite the interruption of the negative correlation between the USD and gold, we still note the release of the Fed’s November meeting minutes later today as a possibly disruptive event under certain circumstances. It should be noted that the release of the Fed’s past meeting minutes created little buzz among market participants as they did not offer anything substantially new.

Yet we do see a shift in Fed policymakers’ stance as worries for the inflationary effect of Trump’s proposed policies could alter the bank’s rate cutting direction. Should the comments made by Fed policymakers enhance market expectations for the bank to pause or further ease its rate cutting path, the release could weigh on gold’s price. 

Gold Technical Analysis

XAUUSD 4H Chart

• Support: 2600 (S1), 2475 (S2), 2350 (S3)
• Resistance: 2685 (R1), 2790 (R2), 2900 (R3)

On a technical level, gold’s price was on the rise over the past week and some point even broken the 2685 (R1) resistance line, yet yesterday tumbled, nearing in today’s Asian session the 2600 (S1) support line.

Given that the precious metal’s price corrected lower interrupting its upward movement of the past week, we tend to maintain a bias for a sideways motion. Furthermore we also note that the RSI indicator dropped below the reading of 50, yet still remains close to the figure, which tends to make any bearish tendencies of the precious metal’s price, unconvincing for now.

Should the bears take over, we would expect gold’s price to break the 2600 (S1) support line clearly and start aiming for the 2475 (S2) support line which was tested as both, a support and a resistance line. Even lower we note the 2350 (S3) support level. Should the bulls regain control over gold’s price, we may see it breaking the 2685 (R1) resistance line and take aim of the 2790 (R2) resistance hurdle that marks also a record high level for gold’s price. Even higher we note the 2900 (R3) resistance level as another possible target for the bulls.

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