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Gold Prices Hit New 3-Month Highs on New Year’s Eve Despite Positive US-China Trade Deal News

Gold prices
Gold prices

Despite generally positive data from the US, gold prices continued to trade higher in yesterday’s trading. XAUUSD opened at $1,510.92 and closed at $1,1514.55. The precious metal also extended its rally in today’s Asian session. XAUUSD is currently trading over 9 dollars above its opening price at $1,524.17.

Positive US Data

Yesterday, the Chicago PMI topped expectations when it printed at 28.9 versust the 48.2 forecast for December. While this reading is still below the 50.0 baseline figure which would indicate an economic expansion in the area, it was higher than the November reading at 46.3 which suggests improving business conditions. Meanwhile, pending home sales fell short of the 1.5% forecast at 1.2% for November. We did, however, see an upward change to October’s reading from -1.7% to -1.3%.

US-China Phase One Deal to Be Signed This Weekend?

There were also reports that the US and China will sign their phase one deal this coming weekend. Word is that chief negotiator Liu He will lead a delegation to Washington this weekend to finalize the deal between the two countries and ease tensions sparked by the trade war.

This should be bearish for gold because the positive news does not highlight the need for safe haven assets. However, it would seem that investors are still unwinding their long-dollar positions after heavily buying the dollar in the last quarter of the year.

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Gold Price Outlook

On the monthly time frame of XAUUSD, we can see that the three-month consolidation on gold prices formed what looks like a bullish flag chart pattern. In fact, with the current price of gold already at their three-month highs, the bullish flag may just be completed. This means that gold prices could soon rally up to resistance around $1,554.99 where XAUUSD tapped its year-to-date highs. If there are enough buyers in the market, gold prices could even re-visit their 2012 highs at $1,783.62.

On the other hand, if the dollar regains its strength in the coming months, we could see XAUUSD fall to around $1,409.70. This price seems to align with the 50% Fib level when you draw the Fibonacci retracement tool from the low of May 2019 to the high of August 2019. On top of that, the price also coincides nicely with the rising trend line from connecting the lows of October 2018 and May 2019.