Gold – Potential Choppy Price Action AheadThe market got what it wanted from the Federal Reserve last night when a widely anticipated interest rate cut of 25bps (0.25%) was announced, a move which as a rule is positive for Gold prices as it is an asset that doesn’t bear any interest itself. Initially this was the case, with the popular metal trading from opening levels at 4210 before the Fed decision on Wednesday up to a one week high of 4248 early this morning. However, that is where the positive story ended and Gold prices have since traded back down to 4210 again at the time of writing (0700 GMT).
On a longer-term basis, the drivers underpinning prices still seem to remain in place, namely central bank buying dips, concerns over swelling government debt and an uncertain geopolitical outlook, but in the short-term Gold prices could be at the mercy of general risk sentiment, which is wavering after a disappointing Q3 earnings release from Oracle overnight, and positioning readjustment. This situation isn’t helped by the reality that there is little in the way of scheduled risk events for traders to focus on until the release of US Non-farm Payrolls next Tuesday, December 16th (1330 GMT) and the interest rate decisions from the Bank of England, European Central Bank (December 18th) and Bank of Japan (December 19th).
This backdrop could suggest potential for some choppy price action ahead which may require traders to keep monitoring important support and resistance levels that could impact the direction of Gold moving forward.
Gold Technical Update: Watching the 4245/4265 Resistance Band
Since posting the 4381 October 20th high and 3887 October 28th low, Gold has entered a more balanced phase of sideways trading between these extremes. The over‑extended upside price conditions seen after the recent sharp acceleration higher are currently being unwound by this activity.
This current balance between buyers and sellers is evident in the chart below, but it also highlights that no successful closing breakout has yet materialised in price.
Gold’s initial response to the Fed interest rate cut and subsequent press conference yesterday was more positive, with fresh price strength emerging. However, there is still no evidence of a successful breakout to the topside on a closing basis.
As such, maintaining an awareness of both key support and resistance levels could be important in gauging whether the recent sideways trading range is nearing an end.
Possible Resistance Levels:
As the chart below highlights, there is a combination of potential resistance levels situated just above current price activity. This zone reflects both the downtrend line connecting price highs back to October 20th, which sits at 4245 and the December 1st high at 4265. Having previously marked areas where selling pressure has emerged, traders may now be focused on how this resistance band is defended on a closing basis.
Closing breaks above 4245/4265 could lead to a fresh phase of price strength, marking an upside break in Gold from its sideways activity. While not a guarantee of sustained gains, such a move could open potential to challenge the 4381 October 20th extreme and possibly extend further if that level also gives way on a closing basis.
Potential Support Levels:
For now, the 4245/4265 resistance band remains intact. While this area continues to cap attempts at price strength on a closing basis, risks may shift toward the downside, bringing the Bollinger mid‑average at 4155 into play as a potential support level to monitor.
Closing breaks below this support at 4155, if seen, could suggest scope for continued declines toward 3998, the November 18th low. If this level also gave way, it may open the path toward 3887, the October 28th downside extreme.
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