Gold price outlook: Key levels to watch for potential upside

Gold had a strong performance in 2024, steadily reaching new record highs.

Bullion has experienced a consistent upward trajectory, broken numerous records and ranking among the top-performing asset classes for the year. Its performance has been both impressive and unyielding, making it one of the most unexpected market developments of 2024.

Prices remained relatively stable during Morning US trading on Monday, reflecting subdued activity due to year-end market conditions. However, gold is poised to finish the year with significant gains, driven largely by the U.S. Federal Reserve's interest rate cuts throughout the year. Gold trading usually experiences low volumes and muted price movements toward the end of the year, as many market participants finalize their positions before the holiday break.

Rising U.S. yields have acted as a challenge for precious metals, but a potential decline in yields could enhance the attractiveness of assets like gold and silver.

When gold prices are rising, the correlation with the Nasdaq, Bitcoin, and U.S. bond yields can vary depending on the underlying economic conditions, investor sentiment, and market dynamics. Here's how these correlations generally behave

Gold and Nasdaq

Inverse or low correlation: Gold and the Nasdaq often have an inverse or low correlation. Typically, when the Nasdaq is performing well, investors are more inclined to take on risk, which can result in less demand for safe-haven assets like gold, putting downward pressure on its price. However, during periods of heightened uncertainty or market corrections, gold may rise as a safe-haven, even if the Nasdaq is struggling

Gold prices rising while Nasdaq is up: In some cases, gold and the Nasdaq can both rise if investor sentiment is mixed, with some viewing equities favorably while others seek protection in gold due to inflation concerns or other global risks.

Gold and Bitcoin

Positive but volatile correlation: The correlation between gold and Bitcoin is often positive, but more volatile. Both assets are sometimes seen as alternatives to traditional fiat currencies or equities, which could lead to both rising in response to concerns like inflation or currency devaluation. However, Bitcoin tends to be more speculative and volatile than gold, which is traditionally viewed as a stable store of value.

Gold prices rising while Bitcoin is up: If both are rising, it could signal that investors are seeking a mix of speculative growth (Bitcoin) and stability (gold) amid economic uncertainties or inflationary pressures.

Gold and US bond yields

Inverse correlation: Gold and U.S. bond yields typically have an inverse relationship. When bond yields rise, it makes bonds more attractive relative to gold, which does not offer interest income. Rising yields may put downward pressure on gold prices as investors shift to higher-yielding bonds. Conversely, when bond yields fall, gold becomes more attractive as a non-yielding asset and may experience upward price movement.

Gold prices rising with declining yields: When gold prices are rising in conjunction with falling bond yields, it suggests that investors may be seeking a safe-haven in gold, possibly due to concerns about inflation, geopolitical risks, or central bank policy easing. This environment might also indicate a preference for gold over bonds due to lower real yields.

When gold prices rise, the broader market context, such as lower bond yields, increasing bitcoin, or cautious sentiment in tech stocks like the Nasdaq can influence how these assets interact with each other.

Trading Strategies for Gold spot (XAU/USD)

Gold Spot (XAUUSD).

Gold prices dipped to a low of $2596.20 per ounce during the Monday morning U.S. session, which could present a potential buying opportunity, as profit-taking typically begins at this level.

If gold prices rise, they may surpass Monday's high of $2628.61 per ounce. A break above this resistance could propel prices towards the high of $2638.74 per ounce reached last Friday. Additionally, the 20-day moving average is currently at $2638.40 per ounce. Above of this level and a subsequent price increase could create fresh buying opportunities, with the next target being $2652.09 per ounce, the high from December 18th.