Gold Price Forecast – Bulls Lacking Strength

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Gold prices continue to hold near a strong support region amid optimistic global conditions.

Both the United States and China have agreed over the terms of the “Phase 1” trade deal. The key highlights of the deal remain the reduction in the US tariffs on Chinese goods. Also, the Chinese counterpart has promised to buy some American farm, energy, and manufactured goods as a part of the deal.

On the Brexit side, British Prime Minister Boris Johnson has proclaimed to set a hard Brexit deadline of December 2020. PM also hinted at using his Parliamentary controls if there happens any extension to the Brexit transition period beyond 2020.

So, things around are gradually seeming to get better. Amidst this, the gold bulls are trying hard not to transfer control to the bears and continue to consolidate.

Bears Helming the Dollar

Since the start of December, the USD Index has mostly showcased negative sessions. However, a few days back, the Dollar reversed, retracing the upper side. This reversal might be an alarming sign for the gold prices. Anyhow, I can see the Dollar, lacking necessary momentum to display a bull run in the near term.

DXY 1 Day 18 Dec' 2019
DXY 1 Day 18 Dec’ 2019

Right now, if the US Dollar Index continues to drive towards northside then it will immediately encounter strong resistance near 97.75 level. Unlocking this resistance region would be critical as it will open the door into the upper Bollinger Band.

Meantime, on the downside, 96.72 level might act as a significant support level for the Index.

Technical Analysis

1-Day Chart

On the daily chart, though signs of strong weakness are not visible, the XAU/USD pair was still forming a descending triangle bearish pattern. Anyhow, the Stochastic Oscillator was indicating >70 levels, revealing higher momentum for the upcoming moves.

XAU/USD 1 Day 18 Dec' 2019
XAU/USD 1 Day 18 Dec’ 2019

Since the last few sessions, the Gold prices have consolidated and formed several Doji candlesticks. And, at this point, the formation of a Doji shows indecision among the market participants.

4-Hour Chart

On the 4H chart, one thing is quite evident. In the near term, I foresee a Death Cross, as I look the 200-day SMA approaching the 50-day SMA from the top.

XAU/USD 240 Min 18 Dec' 2019
XAU/USD 240 Min 18 Dec’ 2019

Also, the resistance handle near 1479.13 level has been blocking the upside since mid-November. However, the XAU/USD pair continues to test the aforementioned resistance line despite multiple failures.

Nonetheless, the drop might be limited hardly to 8-10 pips as the Ichimoku Clouds remain stalled on the immediate downside.