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Gold technical analysis: 2023 bull market to begin after 50% Fibo breakout?

By Piero Cingari

09:53, 4 January 2023

Bull smashing gold bars
Bull market for gold: Bull smashing gold bars – Photo: Shutterstock

Gold got off to a good start in 2023, rallying to mid-June levels and breaking over a key technical resistance level of $1,841/oz, which corresponds to the 50% Fibonacci level of the 2022 low-to-high range.

The recent upswing in gold prices follows a strong bullish trend that began in early November, when the precious metal bounced off its third bottom in 2022.

A weaker dollar, progress on the reopening from lockdowns in China—a key consumer of jewellery gold—and a favourable winter seasonality due to the wedding season in India and the holiday period throughout the world have likely been the key factors behind the gold's 15% surge over the previous two months.

As noted in our 2023 gold outlook, breaching $1,841/oz might have marked the end of the 2022 major downtrend which could then pave the way for a bull market in 2023.

Gold daily chart

Gold technical analysis as of January 4th, 2023 – Chart: Capital.com, Source: Tradingview

Gold technical outlook: Key levels to watch

What can we expect now that gold has retraced more than half of its low-to-high range for 2022?

In the 2023 gold outlook, I signaled that if bulls prevailed and broke over 1,841 (50% Fibonacci), they may look at 1,895 (61.8% Fibonacci) and then 1,971 (78.6% Fibonacci) as their next targets.

Silver

30.32 Price
-3.050% 1D Chg, %
Long position overnight fee -0.0208%
Short position overnight fee 0.0126%
Overnight fee time 21:00 (UTC)
Spread 0.040

Gold

2,459.07 Price
-0.410% 1D Chg, %
Long position overnight fee -0.0196%
Short position overnight fee 0.0114%
Overnight fee time 21:00 (UTC)
Spread 0.60

Oil - Brent

84.49 Price
+1.530% 1D Chg, %
Long position overnight fee 0.0241%
Short position overnight fee -0.0460%
Overnight fee time 21:00 (UTC)
Spread 0.045

Oil - Crude

81.83 Price
+2.390% 1D Chg, %
Long position overnight fee 0.0320%
Short position overnight fee -0.0539%
Overnight fee time 21:00 (UTC)
Spread 0.030

This technical scenario is currently taking shape, and unless we see any huge selloffs in the following days, a golden cross is also forming as the 50-day moving average is set to cross above the 200-DMA.

As a result, the crucial next levels to monitor for gold are 1,895 (61.8% Fibonacci and March 2022 support line) and the psychological 1,900, before looking at the significant 1,970-2,000 resistance region.

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What could go wrong and stop gold's bullish momentum?

Over the past six months, there has been a strong and opposite relationship between gold and the US dollar index (DXY), as the chart below shows. As a result, any future advances in gold prices should be backed by a weakening USD momentum.

However, if this is not the case and the dollar rebounds owing to hawkish Fed comments (FOMC Dec Minutes are released today) and positive economic data (ISM manufacturing due today and non-farm payrolls due on Friday 6th), gold is likely to encounter some bearish resistance after the strong rally.

The NFPs report on Friday will be very important for gold, with the market anticipating a rise of 200K employees in December, following the stronger-than-expected 263K surge in November. If NFPs beat estimates, the USD may climb in anticipation of a hawkish-for-longer Fed.

Then, 1,840 would act as a crucial support level for gold to see whether the narrative of a major trend reversal may hold in the following weeks.

Gold-US dollar correlation (last 6 months) – Chart: Capital.com, Source: Tradingview

Markets in this article

Gold
Gold
2459.07 USD
-10 -0.410%
DXY
US Dollar Index
103.325 USD
-0.49 -0.470%

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