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Gold market: Quiet before the storm


9 December 2021

The Gold market remained inactive producing rather muted price variations in the past days, as traders prepare for an exciting week ahead. As we move into the final weeks of the current year, traders maybe in the lookout for special events or releases to place orders. In this report we will detail the most important fundamental updates currently driving Gold’s price from our perspective, while we will be ending with a brief technical analysis pointing out levels and possible scenarios. With this outlook we aim to provide assistance to traders following the Gold market.

The most active session within the past 7 days for the Gold market came on the 30th of November during the US morning. During the day, Jerome Powell’s speech struck a sensitive pressure point for the market in general, as volatility increased throughout the board. In this case, Gold’s price headed lower as the Fed Chair basically indicated through his testimony before the Committee of the U.S. Congress that despite some challenges that remain in the picture, the US economy continues to improve with references made specifically within the job market and spending. Issues that remain unresolved but could possibly subside as we move into the next year include the pandemic-related supply and demand imbalances, inflation and the most recent Omicron variant outbreak. Yet in a question after the opening testimony, the Fed Chair stated that due to the same prementioned circumstances backing a strong economy, it could be ”appropriate for the central bank to wrap up its QE program some months earlier”.  That comment may have stood out for traders as even though the wide expectation was for the bank to tapper its QE program earlier, it could be now partially confirmed. Yet, J Powell stated that the FOMC meeting coming up during the next week from the 14th to the 15th maybe a rather decisive one for the future plans of the FED thus we expect all eyes to be fixed on that event.

The greenback has been on the rise in the past daily sessions not allowing for Gold to break out of the sideways motion that has formed recently. The dollar may be supported by the unemployment rate that fell from 4.6% to 4.2% during the November NFP report released last Friday. On the other hand, the considerably lower NFP figure may have sent mixed signals to the market once again limiting Gold’s movement.

As a closure US economic releases in the following days could act as a setup for Gold traders to engage the market and place orders, possibly uplifting volatility as opposed to the previous days. On the 9th of December we get the weekly Initial Jobless Claims figure which had broken decade records at its lowest grounds in November and still remains a strong indicator for the economy. On the 10th of December, we get the crucial and much referred to US inflation data for November. Gold has been traditionally related to inflation as a tool to overcome higher prices. If the monthly and yearly CPI rates rise we could see Gold’s price rising simultaneously. On the other hand, mixed signals can create strong temporary market waves possibly moving Gold’s price in different directions. On the same day we get the Preliminary University of Michigan Consumer Sentiment for December which can also move Gold’s price substantially. Crossing into the next week we get the FOMC meeting from the 14th to the 15th of December and as noted this event can rock the market.

XAU/USD H4 Timeframe

XAU/USD H4 Timeframe

Technically, Gold has been moving in red territory for the past 3 consecutive weeks and continues to be down in the current. At the moment Gold is trading between the (R1) 1795 resistance and the (S1) 1765 support and seems to have stabilized in the most recent 4 hour sessions. At the moment the condensed price action has formed a triangle noted with yellow on our chart, which may imply that the traders may be patient with their orders. A break outside of the triangle seems imminent and depending on which line of the triangle is breached the momentum may follow accordingly. Higher the (R2) 1815 resistance is a level last approached on the 26th of November where the price action peaked. Our final resistance for this analysis stands at the (R3) 1845 line and can be reached if a notable buying interest takes place. Our first support level is the (S1) 1765 which was tested several times in the first days of December and in early November making it a very possible stop in a bearish momentum. Lower than that the (S2) 1745 support remains intact and can be tested in an extensive selling trendline. Yet the final level to the downside for this analysis remains the (S3) 1725 support which was the lowest line Gold has tested since late September. The RSI indicator below our chart remains stable nearby 50 displaying the sideway motion taking place at the moment.

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