Gold prices, which recently touched a six-month high at $2,018 early in the Asian session on Monday, are consolidating above the $2,000 mark as the market braces for a crucial week dominated by inflation data from the United States (US) and the Eurozone.
Despite China’s efforts to boost financial support for private firms and positive developments in Chinese Industrial Profits data, a return of risk-off sentiment in Monday’s Asian trading has pulled gold prices down from their recent highs.
Investors remain cautious due to a lack of details from the People’s Bank of China (PBOC) regarding additional stimulus measures for private firms. Concerns over the rise in China’s respiratory illnesses further contribute to the subdued market sentiment.
The US Dollar finds support from a tepid risk tone and a modest uptick in US Treasury bond yields, limiting the upside potential for gold prices. Market participants are also proceeding with caution ahead of the release of the US Federal Reserve’s (Fed) preferred inflation measure, the PCE Price Index, later in the week.
The inflation data from both the US and the Eurozone will play a crucial role in shaping expectations for future monetary policy decisions. This, in turn, is likely to have a significant impact on gold prices, which are considered a non-interest-bearing asset.
In addition to economic indicators, developments in geopolitical events, such as the temporary ceasefire between Hamas and Israel, are being closely monitored by gold traders. The mid-tier US New Home Sales data is expected to provide additional trading incentives in the absence of high-impact economic releases.
Despite the cautious market sentiment, the technical setup on the daily chart suggests upside potential for gold prices. The 14-day Relative Strength Index (RSI) is pointing north, approaching the overbought territory, indicating the possibility of further gains.
Gold closed above the $2,000 threshold on Black Friday, reinforcing the bullish bias. The immediate resistance is identified at the mid-May high near $2,020, with a breakthrough potentially opening the door for a test of the $2,050 static resistance.
Conversely, the $2,000 level serves as immediate support, and a drop below it could lead to a sharper decline towards the 21-day SMA of $1,978. Further support is located in the $1,955-$1,950 region, and a sustained break below that zone might pose a threat to the November 14 low at $1,944.
As the week unfolds, market participants are keenly observing the interplay of economic data, geopolitical events, and technical indicators to navigate the gold market amid global uncertainties.