A weaker US Dollar Index as well as a bullish chart posture are propelling the gold market higher on Monday as traders return from the Thanksgiving day holiday. Spot gold prices are firmly above the $2,000 level in mid-morning action and the cloud stay above this key level throughout the session. If the bulls can maintain early day strength until the close today, the market could see a fresh flurry of buying in the days ahead. If the bulls fail to hold recent gains, however, the bears could see it as a chance to pounce and could take the market lower in the near term.
The gold market is seeing benefit today not only from a weaker dollar but also from the notion that the Fed may be done raising interest rates. Some recent data has shown tamer inflation figures, and these weaker price pressures may allow the Fed to remain on hold for some time or even to start easing rates again if the economy runs into some serious bumps. As far as the gold market goes, the bulls do not necessarily need lower interest rates to push the market higher. Any further indications that the Fed’s tightening cycle may be over would be sufficient enough to push prices higher. If the yellow metal has been able to crack the $2,000 level with rates at their highest level in over two decades, imagine how high they could potentially go if the Fed did start to cut rates once again.
Inflation and interest rates remain key area of focus for the gold market, but they are not the only areas of focus. The war in Israel has been widely discussed over the weekend as a prisoner swap got underway in the middle of a four-day ceasefire. That ceasefire was extended today by another two days which may allow for the peaceful transfer of more innocent prisoners today and Tuesday. Israel has made it clear, however, that it intends to resume fighting once the agreement is over. The violence could even see an uptick as Israeli forces get deeper into Gaza, while non-combatants continue to pay a price for being stuck in the region. Some aid has been able to get into Gaza in recent days, however, the amount of aid that has reached the region is not nearly enough. Whether Israel allows more aid into Gaza is unclear, and if it does not, more civilians may perish.
The gold bulls are now in charge on the daily chart. The bull’s next upside target is likely the October highs reached just under $2,040. Beyond this area, the $2,050 level would be next. The bears, on the other hand, will target an initial close below the $2,000 level. A close below this key area may entice more bears to jump into the market and a solid swing lower could be seen, taking the market to $1,950 or even lower.