The Trend in Gold Remains Bullish, But Strong Resistance Is Ahead
The gold (XAU) price continued to rise on Tuesday, gaining 0.66% in a relatively quiet trading session.
XAU/USD has been rising since 13 December, but the bullish momentum has weakened lately as trading activity subsided due to the Christmas holidays. The main theme in the market is the Federal Reserve's (Fed) potential shift towards a more dovish policy in 2024. Investors are currently pricing in an 83% chance of a 25-basis-point (bps) rate cut in Q1 2024 and bet that the Fed will reduce the base rate to 4.75–5.00% by May 2024. These dovish expectations resulted in a weaker US dollar and brought the Treasury yields lower, pushing XAU/USD higher.
You may see speculators climb aboard early on the long side, thinking that the metals markets are due for some more upside action in the first quarter,' said Jim Wyckoff, the senior analyst at Kitco Metals. Indeed, according to the Commitment of Traders report, speculators raised their net long position in COMEX gold by 20,365 contracts to 131,749 in the week to 19 December.
XAU/USD was declining slightly during the Asian and early European trading sessions. The underlying trend in gold remains bullish in the absence of any important news. Today, only the release of the US Richmond Manufacturing Index at 6:00 p.m. UTC may trigger some volatility. 'Spot gold should find adequate reasons to remain supported above the psychologically important 2,000 USD level, as long as the Fed can stay the course with its intended rate cuts next year,' said Han Tan, the chief market analyst at Exinity Group. 'Spot gold may break resistance at 2,073 USD per ounce and rise into the 2,080–2,091 USD range, said Reuters analyst,' Wang Tao.
AUD/USD Rose Towards a 5-Month High on the Weakening US Dollar
The Australian dollar (AUD) gained 0.41% on Tuesday and reached a 5-month high as the US dollar continued to weaken on expectations that the Federal Reserve (Fed) will cut interest rates in Q1 2024.
The trend in AUD/USD has been decidedly bullish over the past month. Investors' expectations that the Fed plans to ease its monetary policy in Q1 2024 have damaged the appeal of the US dollar. The Aussie has been one of the most prominent beneficiaries of the dovish Fed. The change in the Fed's monetary policy means that the Reserve Bank of Australia (RBA) now looks relatively hawkish. Moreover, the cheaper US dollar is pushing the price of Australia's export commodities higher, putting additional bullish pressure on the AUD/USD exchange rate.
AUD/USD was rising slightly during the Asian and early European sessions. The volatility will probably remain low for the rest of the week, as the macroeconomic calendar is uneventful, and many traders are out for Christmas and New Year holidays. Today, only the release of the US Richmond Manufacturing Index at 6:00 p.m. UTC may trigger some volatility. Fundamentally, the trend in AUD/USD remains bullish as traders expect the RBA to reduce the interest rate by 25 basis points (bps) by July 2024, while the Fed is expected to cut rates by 75 bps over the same period.