Gold Price Extends Rally Amid US Holiday-Quieted Markets

Market Overview

Since 26th November 2024, gold prices surged above $2,645 per ounce, continuing a three-day rally on Thursday’s trading. This movement came despite lighter trading conditions caused by the US holiday. The rally followed weaker-than-expected US core PCE inflation data for October, which fuelled market expectations of a rate cut by the Federal Reserve in December. Lower interest rate expectations have increased gold’s allure by reducing the opportunity cost of holding a non-yielding asset like gold. However, the upside remains somewhat capped by a strong US economy. Third-quarter GDP growth, rising personal income and spending, and historically low unemployment claims suggest a moderately resilient economic environment, hinting that any rate cuts by the Fed might be modest throughout 2025.

Technical Analysis

On the four-hour chart, gold (XAU/USD) attempts to solidify support at $2,620.94, which represents a higher low above the 26th November trough. A confirmation of this level aligns with the formation rule of two candles after a swing point. At the same time, the price is testing the Fibonacci 61.8% retracement level at $2,643.97, a level that overlaps closely with the midline of the Keltner Channel.

If buyers succeed in breaking through this resistance, their next goal will be to retest the recent peak at $2,658.21. A breakthrough at this level could trigger continued bullish momentum, leading prices towards higher Fibonacci targets, marked by green lines, including $2,668.35, $2,673.64, $2,681.24, and ultimately $2,695.48.

Alternative Scenario

Conversely, if the price fails to decisively break the 61.8% Fibonacci level and eventually turns downward, a retest of the $2,620.94 support level is likely. Should this support level give way, a move towards lower levels marked by Fibonacci projections is plausible. Such action would indicate a return of selling pressure and a shift in momentum to a bearish outlook.

Key Levels

• Resistance Levels:
  • $2,695.48 (Primary Target)
  • $2,681.24
  • $2,673.64
  • $2,668.35
  • $2,658.21 (Key Resistance)
• Support Levels:
  • $2,643.97 (61.8% Fibonacci, Key Level)
  • $2,620.94 (Previous Swing Low)

Key Events to Watch

Given that US markets will be closed on Thursday and Friday for the Thanksgiving holiday, there are no major economic data releases expected from the United States. In this quiet period, market sentiment could be a critical driver of gold’s movement, potentially giving gold the room to extend its rally.

Conclusion

Gold remains buoyed by the prospects of lower US interest rates and a quieter market backdrop. The test of the Fibonacci resistance at $2,643.97 is pivotal. A successful break suggests a continuation of the rally, while failure could see a return of bearish sentiment towards $2,620.94 and below.