(Kitco News) - Christmas has come early for the gold market as easing inflation pressures Friday are expected to support gold prices during a quiet holiday week with little economic data.
All major markets will be closed Monday for the Christmas holiday, and only a handful, including U.S. exchanges, will be open Tuesday.
Faced with thin volume and higher volatility, some analysts have said that traders will have a difficult time defining any trend in the near-term price action; however, some analysts agree that investors need to keep an eye on $2,050 an ounce as prices appear to be capped on the upside.
Spot gold prices are looking to end the week near the psychologically important level, last trading at $2,052.39 an ounce, up 1.6% from last Friday.
Colin Cieszynski, portfolio manager and chief market strategist at SIA Wealth Management, said that while gold is expected to consolidate in the near term, investors should view this price action as a positive signal.
“For the first time, gold is trading comfortably above $2,000 an ounce, and this is something investors have been waiting for,” he said. “After hitting its recent all-time highs, people have been trying to knock gold down, but they just can’t, so some consolidation into the new year would be very positive.”
In a note on social media, James Stanley, senior strategist at Forex.com, said that he sees gold prices trading in a quiet range through the holidays.
“$Gold looks like it could still do something by [end-of-year], but bulls don't seem to want to re-test that space b/w 2050 and 2075 has been a painful spot for $XAUUSD buyers over the past few years,” Stanley said.
However, analysts at FXStreet.com said gold has solid bullish momentum ahead of next week.
“The precious metal is expected to continue its upside towards $2,070, supported by deepening rate cut expectations,” the analysts said in a note. “Bullish momentum has been triggered as the Relative Strength Index (RSI) (14) has climbed above 60.00.”
Gold will be sensitive to geopolitical uncertainty
Although next week is expected to be relatively quiet, with no major economic releases on the docket, Cieszynski, said that gold could be sensitive to renewed safe-haven demand. With growing turmoil in the Red Sea and the ongoing conflicts in Ukraine and Gaza, Cieszynski said that geopolitical uncertainty is already heightened and it wouldn’t take much to prompt investors to flee to gold as a safe haven asset.
“I don’t expect we will see much action next week, but any external market event would be positive for gold and push prices to the top of its range,” he said.
Keep an eye on the US Dollar
Some analysts have noted that November’s weaker-than-expected PCE inflation data is adding to expectations that the Federal Reserve will cut interest rates sooner rather than later. Markets see a more than 80% chance of a rate cut as early as March.
Growing easing expectations continue to weigh on the greenback as the U.S. dollar index dropped below initial support at 102 points, falling to a five-month low.
In a social media post, Gareth Soloway, president of VerifiedInvesting.com, said that he expects the index to eventually drop below 100 points.
The only two major U.S. economic reports to be published next week will be weekly jobless claims and pending home sales; both reports will be published Thursday.
