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Gold Prices Breakout Higher; Will Forex News from the US Sustain or Dampen Rally?

Gold prices
Gold prices

Gold prices initially traded lower on Friday before bottoming out at $1452.88. XAUUSD rallied to an intraday high of $1,466.36 before closing the month at $1,463.79.

Given the lack of economic data, updates on the US-China trade negotiations, and equities markets giving up some gains on Friday, it would seem that the 84-cent gain on gold was mostly due to profit-taking.

Will we see gold prices trade higher this December?

Well, most of the decline in XAUUSD was driven by optimism on the US-China trade deal. The latest news is that US President Donald Trump has signed the HK human rights bill into law. If this move is enough for the two countries to abandon negotiations, we could see risk aversion pick up. Demand for safe haven assets like gold could then pick up and push gold prices higher. Remember that Beijing has warned that it would retaliate if the US pushes through with the law which is seen to side with pro-democracy protesters.

Another reason for the drop on XAUUSD is that the prospect of further easing from the Fed has become less likely. Federal Reserve Chairman Jerome Powell has said that they will only ease further if economic data forces them to re-assess their forecasts. Therefore, gold prices could rally if this week’s roster of economic data disappoints consensus as they could affect the Fed’s estimates.

Busy Week Ahead

Later today, at 2:45 pm GMT, the final manufacturing PMI for October is due. It is expected at 52.2. Then at 3:00 pm GMT, a reading of 49.2 is forecasted for the November ISM manufacturing PMI.

The biggest report due this week is going to be the Non-Farm Payrolls report for November which is due on Friday. Ahead of it, we have the ADP non-farm employment change report on Wednesday which tries to predict the NFP. The ISM non-manufacturing index is also due on the same day.

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Gold Price Outlook

On the 4-hour chart, we can see that gold prices have broken out of the symmetrical triangle. In forex trading, this upside break is taken as an indication that XAUUSD may continue to trade higher to its November 20 highs around $1,479.04. This price also seems to coincide with the 100 SMA.

On the other hand, it’s also worth noting that XAUUSD failed to close above the 100 SMA. If resistance at the moving average holds and sellers dominate today’s trading, gold prices could trade lower to support around November lows at $1,445.56.Download our latest quarterly market outlook for our longer-term trade ideas.

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