Gold Prices Surge Following Ceasefire Deal and Technical Support
- Gold rises as traders “buy the fact” of the ceasefire deal brokered between Israel and Hezbollah on Tuesday.
- Technical support from a major trendline is also adding upside pressure as it represents a key chart level for Gold.
- Wednesday sees an economic data dump from the US; changes in interest rate expectations could impact Gold price.
Gold (XAU/USD) has seen a resurgence, climbing into the $2,650s on Wednesday as traders react to the ceasefire deal between Israel and Hezbollah. The agreement, reached after heavy selling on Monday based on rumors, has led to a positive market sentiment. The ceasefire, although temporary, has held for 60 days, with some concerns about its sustainability without a resolution in Gaza.
Gold’s rise can also be attributed to safe-haven flows due to geopolitical tensions in other regions. Reports from Ukraine indicate growing instability on the frontline, further fueling investor interest in Gold as a hedge against uncertainty.
Furthermore, a weaker US Dollar on Wednesday has provided additional support for Gold, given the negative correlation between the two assets.
The Dollar faced volatility following the release of mixed US economic data on growth and the labor market, with Gold seeing a modest increase in response.
Market Speculation on Fed Rate Cuts Boosts Gold
Gold prices may receive further support from the increasing likelihood of the Federal Reserve cutting interest rates at its upcoming December policy meeting. The CME FedWatch tool indicates a rising probability of a rate cut, currently standing at around 63%.
The prospect of lower interest rates is favorable for Gold as it reduces the opportunity cost of holding the precious metal, making it a more attractive investment option for traders.
Technical Analysis: XAU/USD Rebounds from Major Trendline
XAU/USD Daily Chart
The daily chart for XAU/USD indicates a medium and long-term uptrend, suggesting a bullish bias in the overall trend. However, the short-term outlook remains uncertain.
A break above $2,721 would signal further upside potential, with a target of $2,790, aligning with previous record highs. Conversely, a decisive break below the major trendline could indicate a shift to a bearish trend.
Key indicators to watch for a trend reversal include a significant price movement accompanied by strong volume and candlestick patterns confirming the breakout.
Economic Indicator: Durable Goods Orders
The Durable Goods Orders, released by the US Census Bureau, measure the cost of orders received by manufacturers for durable goods. These orders, which include products intended to last for three years or more, provide insights into US production activity and economic health.
A high reading in Durable Goods Orders is generally seen as bullish for the USD, indicating strong demand for long-lasting goods and a robust manufacturing sector.
Last release: Wed Nov 27, 2024 13:30
Frequency: Monthly
Actual: 0.2%
Consensus: 0.5%
Previous: -0.8%
Source: US Census Bureau
Analysis and Implications
The surge in Gold prices following the ceasefire deal and technical support highlights the metal’s role as a safe-haven asset during periods of geopolitical uncertainty. Investors turn to Gold as a hedge against risks, driving up its value in response to global tensions.
Moreover, the market speculation on potential Fed rate cuts underscores the interplay between monetary policy and Gold prices. Lower interest rates reduce the opportunity cost of holding non-interest-bearing assets like Gold, making it more appealing to investors seeking returns in a low-rate environment.
From a technical perspective, the bounce off the major trendline signals ongoing bullish momentum in the long-term trend for Gold. Traders should monitor key price levels and volume indicators for potential trend reversals and entry points in the market.
Overall, the dynamics of Gold prices are influenced by a combination of geopolitical events, economic data releases, and market expectations regarding central bank policies. Understanding these factors can help investors make informed decisions and manage risks in their portfolios.