The US GDP data is bright, gold bulls are "blocked", and the market increases bets on interest rate cut expectations or provides support for gold prices

On Wednesday (November 29), gold prices retreated from an overnight high above $2,050 an ounce as the market reacted to stronger-than-expected economic activity in the third quarter.

As of press time, spot gold is quoted at $2041.32/ounce.

(30-Minute chart of spot gold)

On Wednesday, the Bureau of Economic Analysis said third-quarter gross domestic product grew faster than initially estimated, reflecting upward revisions to business investment and government spending. Real GDP grew at an annualised quarterly rate of 5.2 per cent in the third quarter, the fastest pace in nearly two years. Personal consumption expenditure rose at a less robust rate of 3.6 per cent in the third quarter.

Giovanni Staunovo, an analyst at UBS, said: "A weaker dollar and slightly dovish comments from Fed officials have led to lower interest rates in the past 24 hours, boosting gold prices. The next resistance could be a new all-time high in 2020."

The dollar index rose slightly against other currencies, but was still on track for its worst monthly performance in a year, adding to the appeal of other currency holders.

The 10-year Treasury yield fell to a more than two-month low.

According to CME Group's FedWatch tool, traders now see a more than 70% chance of a rate cut in May, up from 50% on Tuesday, after Federal Reserve Governor Paul Waller said a rate cut was possible in the coming months.

Lower interest rates reduce the opportunity cost of holding interest-free gold.

"The environment of continued economic uncertainty and the consequent prospect of lower interest rates bodes well for gold prices," said Ryan McIntyre, senior portfolio manager at Sprott Asset Management. "In addition to interest rate and geopolitical uncertainty, the US fiscal trajectory will increasingly come into focus and, barring a dramatic change, should favour gold."

technical analysis

From a technical standpoint, gold futures bulls have a solid overall near-term technical advantage. Prices are in a six-week uptrend on the daily chart. The bulls' next upside price target closes above the solid resistance level of $2,100.00. The bears' next near-term downside price target is to push below the solid technical support level of $2,000.00.

The first resistance level is the overnight high of $2,072.70, followed by $2,085.00.

The first support level was $2,050.00, followed by the week's low of $2,022.00.