This report delves into the gold and silver markets, offering comprehensive insights into the fundamental and technical elements influencing recent trends. It is designed to empower investors with the knowledge needed to navigate these dynamic markets effectively.
Gold is poised to close the year with an impressive 27% increase, marking its best annual performance since 2010. However, the non-yielding asset is under pressure due to expectations of fewer Federal Reserve (Fed) rate cuts in 2025. Despite this, gold continues to draw support from ongoing geopolitical tensions, including the prolonged conflicts in Russia-Ukraine and the Middle East.
The U.S. Federal Reserve recently announced plans to slow the pace of interest rate reductions amidst persistently high inflation. Additionally, former President Donald Trump’s upcoming return to the White House on January 20, coupled with his expected protectionist policies, could further intensify inflationary pressures. The surge in gold prices has been driven by robust central bank purchases, escalating geopolitical uncertainties, and monetary easing by major central banks. However, trading volumes remain subdued due to the festive season and year-end holidays. Most major markets will close for the upcoming Christmas celebrations.
Gold fell below the $2,600 level during the American trading session, continuing its retreat from Friday’s peak of $2,638. The strengthening U.S. Dollar (USD) has impacted sentiment, with thin trading conditions amplifying declines and increasing near-term demand for the USD.
The 14-day Relative Strength Index (RSI) hovers just below the neutral 50 level, suggesting balanced market sentiment. A move above 50 could indicate renewed buying interest in gold. On the upside, the XAU/USD pair may aim for the significant psychological resistance level of $2,700. Currently, the Stochastics Oscillator is at 21, and the RSI reads 44, reflecting mild bearish momentum.
Silver is testing support levels between $28.75 and $29.00, as the gold/silver ratio edges closer to the crucial 90.00 level. A close at this level could pave the way for further declines, targeting the $28.70 to $28.18 range.
Technical indicators reflect bearish sentiment in the short term, with the Stochastics Oscillator at 11 and the RSI at 36, both signaling oversold conditions. These levels may attract buying interest if market sentiment shifts.
Navigating the complexities of the gold and silver markets requires a balanced approach, leveraging both technical and fundamental analysis. This report aims to provide investors with the tools to make informed decisions in the dynamic bullion landscape.