Year after year, it bears repeating that January is seasonally the best month for gold. It is just one of those things in markets and more often than not, that trend delivers as it should. But will it do so again this time around?

I touched on that two weeks ago here in relation to a bit of a technical setback in gold at the time. But since then, gold has rallied back to sit higher in December trading, recovering from around $1,975 to around $2,050 currently. However, the key resistance from the 2020 high at roughly $2,075 continues to hold on the daily, weekly and monthly charts, and that remains the critical level to watch heading into next year.

Normally, I’d like to think that gold can bank on this seasonal tailwind 9 times out of 10. But considering the technical situation above, it’s not necessarily a given that gold will be able to shine in January trading once more. That is because if gold is to advance further, it has to pass the test of breaking the key resistance level outlined above. And that means gold needs to push up to close at record levels.

The rally in gold since November also comes on the back of a softer dollar and sliding bond yields, with the latter being a key driver in particular. That comes as the rates market steps up pricing for central bank rate cuts for next year.

The question for gold now is, will traders front run those expectations further and manifest that in the form of a technical break in January? Or will such a break require validation from the rates market?

It’s certainly an interesting one and may act as one of the first few litmus tests in gauging the market’s appetite on the central bank outlook to kick start 2024 trading.

This article was written by Justin Low at www.forexlive.com.

The long-awaited pivot by the Fed finally came in the final FOMC meeting for the year. And that sets up the stage for other major central banks to also follow suit starting next year, unless you’re the Bank of Japan of course. 2023 has been a year dominated by the outlook for major central banks and 2024 will be no different in that regard.

The only thing now is that we’re no longer talking about rate hikes but rate cuts instead. Traders have over the last two months, moved to aggressively price in rate cuts for most major central banks and that sets the backdrop heading into the new year.

It will be a push and pull between the current market pricing and any central bank pushback in the months ahead. All that before the likelihood of central banks conforming to market expectations and then slowly guiding rates back lower, as the disinflation process looks to gather pace in the year ahead.

Given such a predicament, the bond markets i.e. rates will continue to be a pivotal spot to watch – just as it had been this year. The real debate now in Q1 2024, is whether or not traders have it right to price in rate cuts as early as March to May for the likes of the Fed, ECB, and BOE in particular.

And if not, will that stem from a pushback from policymakers or more stubborn inflation data? And how much of a reversal or squeeze will we see to the recent sell the dollar, buy everything else move in markets?

On the flip side, if central banks start agreeing to traders‘ pricing, is there room for a further extension to the recent moves? Plenty of questions but only time will tell.

This article was written by Justin Low at www.forexlive.com.