XAUUSD - Gold went below $2700!
Gold is below the EMA200 and EMA50 in the 1H time frame and is trading in its descending channel. If we maintain the drawn channel, we can witness the continuation of gold's decline and limited visibility of the bottom of the channel. Within the demand zone, we can buy with a suitable risk reward. In case of valid failure of the ceiling of the channel, it is possible to sell within the supply zones.
Gold demonstrated a strong performance earlier last week, surging nearly $100 from its weekly low and sparking fresh optimism among traders. However, higher-than-expected inflation data and a stronger U.S. dollar reversed the market dynamics, putting renewed selling pressure on precious metals.
The latest weekly Kitco survey revealed that industry analysts are evenly split between bullish and bearish views, with a notable portion of respondents adopting a neutral stance. Meanwhile, retail traders’ optimism for gold remained unchanged compared to the previous week.
Marc Chandler, CEO of Bannockburn Global Forex, stated, “Gold saw an $85 rally in the first three days of the week, likely driven by reports of China’s central bank (PBOC) adding gold to its reserves for the first time in months. The metal reached $2,726 per ounce on the spot market on Thursday, marking its highest level in over a month, but then turned downward.”
He further added, “Some analysts attributed the price decline to stronger-than-expected U.S. Producer Price Index (PPI) data. Nonetheless, gold ended the week on a positive note, breaking its two-week losing streak.”
Chandler also noted, “Since late October, this marks only the second positive week for gold. A cautious approach by the Federal Reserve to rate cuts—indicating that rates will be reduced but further cuts are unlikely next year, with a potential halt to tightening policies in early 2025—could pave the way for another test of the $2,600 level.”
This week, the Federal Reserve is set to hold a two-day policy meeting, with monetary decisions expected to be announced on Wednesday. The central bank is anticipated to reduce the interest rate by 0.25%, bringing it to a range of 4.25%-4.5%. Additionally, the Fed will release its updated “Summary of Economic Projections,” known as the dot plot.
In September, the median Fed officials’ projection for interest rates by the end of 2025 stood at 3.4%. If this forecast is revised down by more than 1%, the U.S. dollar could face immediate downward pressure. In such a scenario, U.S. Treasury yields may decline, boosting gold prices.
Market participants will also closely monitor remarks by Federal Reserve Chair Jerome Powell. Should Powell strike a cautious tone regarding further monetary easing and emphasize a gradual approach, the dollar may maintain its strength against its rivals. Conversely, if he raises concerns about declining labor market conditions and their potential adverse impact on economic growth, the dollar could come under selling pressure.
Additionally, on Thursday, the U.S. Bureau of Economic Analysis will release the final revision of Q3 GDP data, and on Friday, the Personal Consumption Expenditures (PCE) Price Index for November will be published.
Market reactions to the PCE inflation report are likely to remain muted after the Fed’s announcement.
According to Bloomberg, Wall Street is shifting its outlook on the U.S. dollar, as Trump’s policies and the Federal Reserve’s rate cuts in the latter half of 2025 could weigh on the greenback. Analysts from Morgan Stanley to JPMorgan predict that the global reserve currency will peak by mid-2025 and then begin to decline. Société Générale also forecasts a 6% drop in the U.S. Dollar Index by the end of next year.
Gold demonstrated a strong performance earlier last week, surging nearly $100 from its weekly low and sparking fresh optimism among traders. However, higher-than-expected inflation data and a stronger U.S. dollar reversed the market dynamics, putting renewed selling pressure on precious metals.
The latest weekly Kitco survey revealed that industry analysts are evenly split between bullish and bearish views, with a notable portion of respondents adopting a neutral stance. Meanwhile, retail traders’ optimism for gold remained unchanged compared to the previous week.
Marc Chandler, CEO of Bannockburn Global Forex, stated, “Gold saw an $85 rally in the first three days of the week, likely driven by reports of China’s central bank (PBOC) adding gold to its reserves for the first time in months. The metal reached $2,726 per ounce on the spot market on Thursday, marking its highest level in over a month, but then turned downward.”
He further added, “Some analysts attributed the price decline to stronger-than-expected U.S. Producer Price Index (PPI) data. Nonetheless, gold ended the week on a positive note, breaking its two-week losing streak.”
Chandler also noted, “Since late October, this marks only the second positive week for gold. A cautious approach by the Federal Reserve to rate cuts—indicating that rates will be reduced but further cuts are unlikely next year, with a potential halt to tightening policies in early 2025—could pave the way for another test of the $2,600 level.”
This week, the Federal Reserve is set to hold a two-day policy meeting, with monetary decisions expected to be announced on Wednesday. The central bank is anticipated to reduce the interest rate by 0.25%, bringing it to a range of 4.25%-4.5%. Additionally, the Fed will release its updated “Summary of Economic Projections,” known as the dot plot.
In September, the median Fed officials’ projection for interest rates by the end of 2025 stood at 3.4%. If this forecast is revised down by more than 1%, the U.S. dollar could face immediate downward pressure. In such a scenario, U.S. Treasury yields may decline, boosting gold prices.
Market participants will also closely monitor remarks by Federal Reserve Chair Jerome Powell. Should Powell strike a cautious tone regarding further monetary easing and emphasize a gradual approach, the dollar may maintain its strength against its rivals. Conversely, if he raises concerns about declining labor market conditions and their potential adverse impact on economic growth, the dollar could come under selling pressure.
Additionally, on Thursday, the U.S. Bureau of Economic Analysis will release the final revision of Q3 GDP data, and on Friday, the Personal Consumption Expenditures (PCE) Price Index for November will be published.
Market reactions to the PCE inflation report are likely to remain muted after the Fed’s announcement.
According to Bloomberg, Wall Street is shifting its outlook on the U.S. dollar, as Trump’s policies and the Federal Reserve’s rate cuts in the latter half of 2025 could weigh on the greenback. Analysts from Morgan Stanley to JPMorgan predict that the global reserve currency will peak by mid-2025 and then begin to decline. Société Générale also forecasts a 6% drop in the U.S. Dollar Index by the end of next year.
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