Gold eyes further gains with bullish setup ahead of US services PMI data
|The gold market has seen a mix of volatility and resilience during the past few days. On Monday, gold prices fluctuated within a range and waited for the US economic data releases for direction. The metal reversed earlier gains during the European session, dipping to $2,615, driven by weakening optimism about China's stimulus measures and lower physical demand from India. Despite these challenges, the chart's technical patterns suggest an upward trajectory in the long term.
Gold bullish technical formation
The chart below presents critical moments in gold's price evolution. Over the past few years, gold prices have formed a sequence of cup-and-handle patterns, a strong bullish technical indicator. These formations signal a continuation of upward trends as the price has broken from the resistance level near $2,000.
Following this breakout, gold entered an ascending channel, with prices steadily rising toward the $2,654 mark, as depicted. This ascending channel suggests that buyers remain firmly in control despite occasional pullbacks. The recent red circle in the chart highlights a short-term correction, potentially offering a new buying opportunity for traders.
The macro factors continue to influence gold's trajectory. Goldman Sachs recently revised its projection for gold to hit $3,000 per ounce, extending the timeline to late 2025. Such predictions weigh heavily on market sentiment. Meanwhile, India's demand for gold has faltered due to a weaker rupee, making the precious metal more expensive domestically. As one of the world's largest gold consumers, India's reduced appetite has introduced headwinds.
On the other hand, geopolitical developments, particularly those surrounding former US President Donald Trump's proposed tariff plans, have added uncertainty to the market. Reports suggesting targeted tariffs on critical sectors weakened the US dollar, supporting gold prices during American trading hours. However, Trump's denial of these plans allowed the dollar to recover, capping gold's gains.
Market participants will watch the US ISM Services Purchasing Managers Index (PMI), which will be released later in the North American session. Furthermore, attention will shift to the Federal Reserve's December policy meeting minutes on Wednesday, which could provide insights into the central bank's future monetary strategy.
Conclusion
The gold market remains a battleground of bullish technical patterns and bearish macroeconomic pressures. The ascending channel shown in the chart indicates strong momentum, with the potential for gold to challenge higher levels in 2025 and beyond. However, traders should monitor critical events like US Nonfarm Payrolls data and Federal Reserve speeches for short-term price guidance.
Gold's ability to attract buyers during periods of dollar weakness presents its safe-haven appeal. For long-term investors, the ongoing pullbacks may present opportunities to accumulate positions as gold trends toward $3,000 per ounce. As macroeconomic and technical factors align, gold appears poised to retain its upward trajectory soon.
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