Gold Price Forecast: XAU/USD struggle with $2,000 extends on Thanksgiving Day
- Gold price is making a fresh run toward $2,000 amid fresh US Dollar weakness.
- Market optimism on a likely end to the Fed tightening cycle is weighing on the US Dollar and US Treasury bond yields.
- Gold price eyes more gains amid a Bull Cross but a fresh batch of US data could act as a headwind.
Gold price is reversing a part of the previous decline on Thanksgiving Day, with markets optimistic about a potential end to the US Federal Reserve’s (Fed) tightening cycle. Gold price is also capitalizing on the thin market conditions amid a holiday in the United States.
Thanksgiving holiday could exaggerate Gold price moves
As well predicted, markets resorted to repositioning on Wednesday heading into Thanksgiving Thursday, as Gold price witnessed some profit-taking from near three-week highs above $2,000. Resurgent demand for the United States Dollar (USD) in the second half of the day also contributed to the pullback in Gold price. The rebound in the Greenback from three-month lows against its major counterparts regained traction after the US weekly Jobless Claims data. Initial claims for state unemployment benefits dropped 24,000 to 209,000 for the week ended Nov. 18, reversing the jump in the prior week to a three-month high.
Encouraging US Jobless Claims data outweighed the negative impact from a bigger-than-expected drop in the Durable Goods Orders, which dropped 5.4% last month, as against the previous jump of 4.6% and expectations of -3.1% in the reported period. Increased expectations that tightening labor market conditions could enable the Fed to hold interest rates higher for longer prompted investors to dial back bets of Fed rate cuts for May 2024. The renewed hawkish Fed expectations lifted the US Treasury bond yields from multi-week lows while weighing down on the Gold price.
Markets are likely to trade with caution on Thanksgiving Thursday, as thin liquidity could exaggerate the moves in Gold price. However, the upbeat market mood could continue exerting downward pressure on the US Dollar, underpinning the sentiment around Gold price.
In the meantime, Gold traders can take cues from the Euro area and the UK Preliminary business PMIs, reflecting the strength of the economies, which could have a significant impact on risk sentiment and eventually on the US Dollar and Gold valuations. Meanwhile, on Friday, the S&P Global will publish the preliminary PMI reports for the US.
Gold price technical analysis: Daily chart
Risks remain skewed to the upside for Gold price following a 50-day Simple Moving Average (SMA) and 100-day SMA Bull Cross confirmation.
Further, a bullish 14-day Relative Strength Index (RSI) indicator also adds credence to the upside potential.
Daily closing above the $2,000 threshold is critical to unleashing more gains, with the multi-month high of $2,009 seen as the initial resistance. The next upside target is aligned at the mid-May high near $2,020.
To the downside, the immediate support is seen at the 21-day SMA of $1,977, below which the $1,955-$1,950 region will be on Gold sellers’ radars.
A sustained break below the last could threaten the November 14 low at $1,944, followed by the ascending 200-day SMA at $1,939.
Gold FAQs
Why do people invest in Gold?
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Who buys the most Gold?
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
How is Gold correlated with other assets?
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
What does the price of Gold depend on?
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
