Are we setting up for another Gold Christmas rally?After a week of holiday trading volume, weakness in the U.S. Dollar continued after deteriorating economic data opened the door for the Fed's first interest rate cut in 2024. As of this writing, the first interest rate cut has a 23% chance in March 2024 and has pressured 10-year Treasury yields from a cycle high of 5.05% on October 23rd down to the November low of 4.36%. That selloff has sparked renewed interest in the bullion, where ETF inflows have picked up after hitting their lowest level since 2020. While the conflict in the Middle East has been subsiding, geopolitical uncertainties should underpin prices in the long term.
Taking it to the Charts
Technically, it was a constructive week for Gold, with prices consolidating above the 200 DMA ($1982) and looking to challenge recent resistance at $2020. Any breach above should trigger the next wave of short covering followed by fresh buying. Momentum studies are turning higher, with stochastics rising from oversold territory, followed by the MACD histogram, which is also beginning to rise. Remember that every bull market starts with a short-covering rally.
Where is my line in the sand?
Pocket support for Gold is between $1955 and the 50 DMA at $1944, where any close below this level could spark "panic" liquidation. We see value in adding to Gold positions near the 200 DMA.
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