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Fundamentals

During Wednesday's (December 13th) Asian session, spot gold depreciated slightly, and it is now trading at $1980. U.S. CPI growth for November slowed down YoY but accelerated MoM. Besides, the core CPI increased 4% YoY, and failed to cool down as expected. It was another data after the strong non-farm payrolls last Friday that saw a rebound, reducing expectations of interest rate cuts. Yesterday's gold price oscillated in a narrow range during the Asian session, but it once surged to $1997 in the U.S. session in the speculation of CPI downside expectations. As it reached the upper area of our given trading range, it was an excellent opportunity to short gold. After the data was released, gold plunged to $1977. Then, we took profits as we kept a bearish position at the beginning of this week. The Fed will be release the interest rate decision today. Given the correlation of the inflation and employment data, Powell may downplay the possibility of interest rate cuts next year, and gold prices will continue a weak trend. Therefore, we will maintain our bearish views to go short, but the current retracement is just part of the big-circle bull market. While the U.S. economic performance was outstanding at the moment, a lot of data has reflected a weak trend, including that the manufacturing PMI has declined for 13 consecutive months and dropped below the 50 threshold level. A similar situation last occurred in 2008 during the U.S. economic crisis. A U.S. economic recession is highly possible, which may be a booster for the gold price. Currently, gold is still in a weak pattern, and it will test the initial support near $1965. Further support will be at $1950, and strong support will stay in the range from $1935 to $1942. If the gold price falls to this range, it will be a good opportunity to go long at lows. There will be little chance during the Asian session, so investors should avoid trading and take a rest, and wait for an opportunity in the U.S. session after the rate decision.  

Data: U.S. November CPI (without seasonal adjustment) was annualized at 3.1%, a new low since June this year, and it was in line with market expectations. The expected CPI was 3.10%, and the previous reading was 3.20%. In addition, U.S. November CPI (seasonal adjusted) was recorded at 0.1% MoM, a new high since September this year, higher than the market expected 0%.

Today's focus: Investors should pay attention to Thursday's retail sales data and the Fed's rate decision today, including the dot plot and economic forecasts.  

Technical Analysis

Gold oscillated near $1986 during the last Asian session. At the beginning of the U.S. session, it rebounded to $1997 after the market speculation. However, it plummeted instantly after negative data, and closed lower with a long-upper-shadow. In general, the depreciation was improved yesterday, and gold bulls are ready to take action. Investors should focus on the Fed's rate decision tonight and trade according to the result. The support now is at $1965 in the Asian session. If the decision drags down gold prices, the support will drop to $1950, and a slight rebound may take place with the support. Technically, there is support near $1976 in the 1H chart, and the MACD enters a serious oversold area in the 4H chart. Gold may rebound if it gets support after plunging. Regarding the daily chart, the MACD death cross expands, indicating a bearish trend, but the previous divergence disappears, and a new opportunity will come soon. There should be substantial changes today, and aggressive investors should buy low and sell high in the range of $1950-$1993.

Trading Recommendations

Trading direction: Long

Entry price: 1965

Target price: 2000

Stop loss: 1960

Support: 1965.000/1950.000

Resistance: 1986.000/2009.000