Gold price surges back closer to overnight swing high, 5-month tops

New York (Dec 20)  Gold regained positive traction on Thursday and reversed its post-FOMC sharp retracement slide from over five-month tops.

As was widely expected, the Fed raised benchmark interest rates by 25 bps for the fourth time year and dashed hopes of a more dovish outlook than market players had expected, which prompted some aggressive long-unwinding around the non-yielding yellow metal.

However, the post-FOMC rise in short-term interest rates and a fall in the long-dated yields revived fears of an inversion in the yield curve, seen as a reliable indicator of an upcoming recession, and spooked global financial markets.

The same was evident from a sea of red across global equity markets and eventually underpinned the precious metal's perceived safe-haven demand since the Asian session on Thursday.

This coupled with a fresh wave of USD selling pressure, with the key US Dollar Index tumbling to sub-96.00 level, or multi-week lows, provided an additional boost to the dollar-denominated commodity and further collaborated to the latest leg of an upsurge.

The commodity now seems to have found some acceptance above the very important 200-day SMA and hence, a follow-through up-move, led by some fresh technical buying amid absent relevant market moving economic releases from the US, now looks a distinct possibility.

Technical levels to watch

A follow-through buying has the potential to continue lifting the metal towards $1260 intermediate resistance en-route July monthly swing highs, around the $1266 region. On the flip side, $1250 level now seems to protect the immediate downside, which if broken might accelerate the fall back towards $1242 horizontal support en-route the $1237-35 region.

FXstreet