Gold Price News: Gold Faces Headwinds from Dollar and Rates

Gold continues to labour under some fundamental headwinds. Incoming US growth and inflation data remain solid, and upside surprises have rapidly risen to a seven-month high. 

While the Dollar Index (DXY) appears to have plateaued for now in the 106-107 range, it remains c.6% above its level at the end of September. Meanwhile, the prospect of a 0.25% rate cut at the Fed’s next meeting on 18 December continued to recede, with CME FedWatch currently ascribing a 62% probability. 

The US Federal Reserve has reiterated its relatively hawkish stance, with Chairman Powell suggesting on Friday that ‘the economy is not sending any signals that we need to be in a hurry to lower rates’. Gold starts Monday trading at $2,582/toz.

Flows and Positioning

The most recent Commitments of Traders report from the CFTC, published late of Friday saw net speculative long gold positions flat on the previous week and some 25% below the 54-month high reached at the end of September. However, flow data from physical gold ETCs/ETFs suggests that net outflows accelerated last week across all regions and monthly net outflows have already reached 54% of October’s elevated net inflows

Technical Analysis

Gold remains trading around two-month lows, with recent price action compromising descending oblique support at $2667/toz and the 50-day Simple Moving Average. However, gold is now near a confluence of support levels at $2550/toz (major ascending oblique), $2540/toz (major ascending oblique) and $2525/toz (major horizontal).

Given both the RSI and standard MACD hovering around oversold levels, the most likely path is now one of consolidation, though the heavy volumes still remain a concern. The upside is currently bound by strong horizontal resistance at $2608/toz and a 50-day Simple Moving Average at $2654/toz.

Key Events Ahead

Monday sees speeches from Chicago Fed President Goolsbee (dove, non-voter), Bank of Japan Governor Ueda and European Central Bank (ECB) President Lagarde. The market’s current working assumption is that the ECB will cut rates again by 0.25% in their 12 December meeting, with an outside chance of a 0.5% cut. Tuesday brings the Reserve Banks of Australia’s (RBA) Meeting Minutes, which will test the RBA’s willingness to remain a rate-cutting laggard.