Gold Price Forecast: December seasonality is slightly bearish for the yellow metal

The gold market is looking indecisive while heading into December – a negative month, from a seasonality perspective.  

The metal ended November on a flat note at $1,220, having hit a monthly high and low of $1,238 and $1,196, respectively. Essentially, it created a classic doji candle on the monthly chart, indicating indecision in the marketplace.

Notably, the doji candle has appeared near the top of the recovery rally from the August low of $1,160. As a result, that candlestick pattern could be considered a sign of bullish exhaustion – the recovery rally from the August low of $1,160 has stalled.

That, however, could again pick up the pace if prices close above the November high of $1,238 on Dec. 31. Meanwhile, a close below the November low of $1,196 would signal the corrective bounce has topped out at $1,243.

The Fed minutes released yesterday underpinned expectations that the central bank is nearing an end of the tightening cycle. As a result, the American dollar – gold's biggest nemesis – will likely remain under pressure in December.

The bearish pressure around the USD may accentuate if this weekend's Trump-Xi meeting leads to trade war cease-fire, in which case, gold will likely signal a revival of the recovery rally with a convincing move above $1,238.

The prospects of a break below $1,196 would rise sharply if the US-China trade war escalates, leading to a rise in haven demand for the US dollar.

As far as seasonality is concerned, the odds of a break below $1,196 are high.

• As seen above, the metal has dropped six times in December in the last nine years. Notably, December losses have been bigger than the gains seen in 2010, 2014 and 2017.
• Also, December seasonality was positive prior to 2008.