Gold Prices Moved By Keener Risk Aversion On Friday

Gold futures climbed back above the $1,800 mark on Friday to post their highest settlement in nearly four weeks. The precious metal’s rise above the key $1,800 level appears to be driven by broad capital flows leaving risk markets and moving into defensive havens such as gold.

Gold (XAU/USD) advances for the third successive day, aiming towards ending the week on a higher note, trading around $1,805 during the New York session. The market sentiment is downbeat, as shown by US equity indices posting losses between 0.22% and 1.18%. Meanwhile, US bond yields extend their fall, with the 10-year benchmark note falling three basis points, down to 1.392%, a tailwind for the non-yielding metal.

After the bulk of central banks hosting monetary policy decisions, the yellow metal finally broke the $1,800 barrier, as investors assess the “hawkish” pivot in the Fed, the Bank of England (BoE), and the European Central Bank (ECB). An absent macroeconomic US docket would keep XAU/USD trading within familiar levels.

In the last couple of hours, Fed’s Governor Christopher Waller said that the US economy is “closing in” on maximum employment and backed the Fed’s decision to accelerate the pace of the QE taper. He noted that inflation “is alarmingly high, persistent and has broadened.”

Gold prices posted solid gains and hit a three-week high in early US trading Friday, boosted by surging safe-haven demand as the marketplace is showing a bit of anxiety to end the trading week.

February gold was last up USD 15.40 at USD 1,813.50 and March Comex silver was last up USD 0.12 at USD 22.605 per ounce.

Global stock markets were mostly lower in overnight trading. US stock indexes are pointed toward weaker openings when the New York day session begins.

Today is the quarterly triple- witching phenomenon, the simultaneous expiration of stock options, index options and index futures. These days can cause higher volatility. The stock market bulls late this week have quickly pulled in their horns. It seems traders and investors have pivoted after the US stock indexes posted strong gains in the immediate aftermath of the FOMC meeting Wednesday afternoon.

Thursday’s and Friday’s price action in the stock markets suggest traders and investors have realized they are now staring down the double-barrel shotgun of rising interest rates/inflation and a resurging coronavirus that threatens to again crimp global economic growth.

It could be that other major central banks moving to tighten their monetary policies or signaling their intent to do so, shortly after the Wednesday FOMC meeting pushed traders and investors into risk-averse postures.

Gold prices surged to a nearly three-week high Friday, above USD 1,800.00, on safe-haven demand and as traders seek out the metals as an inflation hedge.

San Francisco’s Federal Reserve President Mary Daily said that it expects unemployment to fall below 4% in 2022, adding that she is bullish on the US economy. Regarding elevated prices, Daly said that “persistence in above-2% inflation is a positive outcome,” as it helps achieve the central’s bank target. Furthermore, she added that she foresees 2-3 rate hikes, but it would depend on how the US economy evolves.

Apart from this, investors’ focus is on the US macroeconomic docket next week. On Wednesday, US GDP (Q3), Consumer Confidence (December), and Personal Consumption Expenditures Prices (PCE) for the Q3 would entertain participants. On Thursday, Durable Goods (Nov),  Initial Jobless Claims (Dec. 17), New Home Sales (Nov), and Michigan Consumer Sentiment (Dec) would offer additional clues on the status of the US economy.

XAU/USD Price Forecast: Technical outlook

Gold (XAU/USD) has a neutral bias, despite trading above the daily moving averages (DMAs). However, once reclaimed the $1792.95 price level, that might open the door for further upside, though there would be some strong resistance levels to face.

The first resistance would be November 26 swing high at $1,815.37. A breach of the latter would expose the September 3 high at $1,834, followed by the November 16 pivot high at $1,877. On the flip side, supports would be found around the DMAs. The first would be the 50-DMA at $1,797.85, then the 200-DMA at $1,794.52, and the 100-DMA at $1,788.35.