• Gold has ended November with a 3.24% loss the biggest monthly decline since June 2018.
  • A bounce could be in the offing next week due to Sino-US political tensions. Technical indicators are reporting seller exhaustion. 
  • Next week's economic calendar is heavy with monthly PMIs and US Nonfarm Payrolls due for release. 

Gold's technical charts are flashing signs of seller exhaustion and calling a corrective bounce after the biggest monthly drop in nearly two years.

The yellow metal has ended November at $1,463 – down 3.24% from the monthly opening price of $1,516. Gold last suffered a bigger monthly drop in June 2018. Back then, prices had dropped by 3.51%.

Also, the metal has eked out marginal gains in the last week of November.

The official data released on Wednesday showed the US economic growth picked up slightly in the third quarter. The annualized gross domestic product (GDP) ticked higher to 2.1 percent as opposed to 1.9 percent predicted last month. The economy grew at a 2.0% pace in the April-June period. Further, the Atlanta Fed raised its fourth-quarter GDP estimate to 1.7% from 0.4%.

The Federal Reserve's (Fed) preferred gauge of inflation, the personal consumption expenditures (PCE) price index excluding food and energy, increased 1.6% in the 12 months through October, having risen by 1.7% in September.

With the US economy looking set to regain a firm footing, markets scaled back expectations for rate cuts in 2020. In fact, the market now pricing in a 5% chance the Fed will hike rates next month.

Even so, gold managed to avoid a big drop below $1,450, possibly due to haven demand. US President Trump signed the Hong Kong Democracy Bill earlier this week. China has called the US' move an interference in its internal matter and has vowed retaliatory measures.

Markets are worried that the developments on the political front may complicate matters on the trade front and the much-anticipated phase-one of the trade deal would remain elusive.

These fears will likely keep the yellow metal better bid next week. The upside would gather traction if the PMI indicators due across the globe highlight a synchronized slowdown.

Notably, the US ISM manufacturing PMI is expected to show the activity contracted in November, while China Caixin manufacturing PMI is forecasted to hold in the expansionary territory above 50.

The US Nonfarm Payrolls (NFP) figure due next Friday is forecasted to show the economy added 183K jobs in November compared to 128K additions in October. The Average Hourly Earnings are seen ticking higher to 0.3% from 0.2%.

Markets will likely start pricing in a higher probability of a Fed rate hike in 2020 if the jobs and wage growth figure blows past expectations. In that case, treasury yields and the US dollar will fly high, sending gold lower.

GMT
Event
Vol.
Actual
Consensus
Previous
Thursday, Nov 28
24h
 
 
Saturday, Nov 30
02:00
 
53.6
52.8
02:00
 
49.5
49.3
Monday, Dec 02
01:45
 
51.4
51.7
14:45
 
52.2
52.2
15:00
 
49.4
48.3
15:00
 
49.9
45.5
15:00
 
0.3%
0.5%
15:30
 
 
1.58%
15:30
 
 
1.56%
20:30
 
 
$-8.4K
20:30
 
 
$285.9K
20:30
 
 
430K
Tuesday, Dec 03
13:55
 
 
4.3%
13:55
 
 
-0.4%
14:45
 
44.7
47.7
16:30
 
 
1.565%
20:30
 
 
16.6M
21:30
 
 
3.639M
Wednesday, Dec 04
01:45
 
52.7
51.1
12:00
 
 
1.5%
13:15
 
138K
125K
14:45
 
51.9
51.9
14:45
 
51.6
51.6
15:00
 
 
15:00
 
54.5
54.7
15:30
 
 
1.572M
Thursday, Dec 05
10:00
 
 
12:30
 
 
50.275K
13:30
 
$-51.5B
$-52.5B
13:30
 
 
1.64M
13:30
 
 
213K
13:30
 
 
219.75K
15:00
 
 
15:00
 
-0.5%
-0.6%
15:30
 
 
-28B
16:30
 
 
1.62%
Friday, Dec 06
09:00
 
 
13:30
 
183K
128K
13:30
 
34.4
34.4
13:30
 
3%
3%
13:30
 
3.6%
3.6%
13:30
 
 
7%
13:30
 
63.3%
63.3%
13:30
 
0.3%
0.2%
15:00
 
96.5
96.8
15:00
 
0.2%
0.2%
18:00
 
 
668
20:00
 
$17.20B
$9.51B

Technical outlook

Gold is likely to see a price bounce ahead of the NFP release, as the long tail attached to the weekly candle is signaling seller exhaustion. Similar sentiments are being echoed by the recent price action. The metal avoided a big drop below $1,450 despite the upbeat US data, as noted earlier.

Further, the daily chart MACD histogram is printing shallow bars below the zero line, indicating a weakening of the bearish momentum.

The bearish crossover of the 50- and 100-day averages is almost confirmed. The long-term bearish crossovers often trap sellers on the wrong side of the market.

All-in-all, a move to $1,470 could be in the offing. Gold may rise well above the resistance at $1,479 (Nov. 20) if the markets turn risk-averse in response to the Sino-US political tensions and the US data paints a negative picture of the economy.

On the downside, the recent low of $1,445 is the level to beat for the sellers. That level could come into play before Friday if the US PMI's beat estimates and the resistance-turned-support of $1,459 fails to hold ground.

Weekly chart

Daily chart

Gold Forecast Poll

1 Week
Avg Forecast 1455.38
100.0%85.0%23.0%02030405060708090100
  • 23% Bullish
  • 62% Bearish
  • 15% Sideways
Bias Bearish
1 Month
Avg Forecast 1455.92
100.0%92.0%38.0%0405060708090100
  • 38% Bullish
  • 54% Bearish
  • 8% Sideways
Bias Bearish
1 Quarter
Avg Forecast 1484.75
0.0%100.0%58.0%0-100102030405060708090100110
  • 58% Bullish
  • 42% Bearish
  • 0% Sideways
Bias Bullish

The Forex Forecast Poll is a sentiment tool that highlights near- and medium-term price expectations from leading market experts. As can be seen, the market is bearish on Gold in the run-up to the NFP release. The yellow metal is seen falling to $1,455 over the next four weeks only to rise back to $1,484 later.

The week gone by also saw a mystery trader buy 5,000 lots of a gold call option, which gives the holder the right to buy the precious metal at $4,000 an ounce in June 2021. Put simply, the trader is expecting gold to triple in value in the next 19 months. 

The U.S. dollar index rose last week a second time in a row. The investors hope the United States and China would be able to weak and even to stop damaging tariff war. Besides, the U.S. GDP Q3 was better than expected. The safe-haven gold was almost unchanged last week again. For the month, gold prices were down almost 4%, it is the biggest decrease since November 2016.

By Dmitry Lukashov | Nov 29, 15:02 GMT

 

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