Gold’s Upside Potential in 2023: A Look at Key Resistance and Support Levels

Key Insights

• Gold managed to get out of the strong downside channel and is trying to gain additional upside momentum. 
• Fed’s policy remains the key risk for gold. 
• In case the Fed is not too hawkish, gold will have a good chance to test the $2000 level in 2023. 

Gold Traders Will Stay Focused On Fed’s Moves

Gold had an eventful 2022. After hitting highs at $2070 in March, gold pulled back to lows at $1615 in September before rebounding towards the $1800 level. What’s in store for gold in 2023?

The recent rebound in gold markets was triggered by the pullback in Treasury yields. However, yields have recently started to move higher as the Fed signaled that it was ready to push the interest rate above the 5.00% level in 2023. High interest rates are bearish for gold that pays no interest.

At this point, the key question is whether the Fed will keep rates near the 5.00% level for many months or it will start to cut rates at the end of 2023. While the Fed’s latest signals were hawkish, many observers doubt that the central bank will be ready to put huge pressure on the economy for the whole year 2023.

Gold’s dynamics will also depend on the dynamics of the U.S. dollar. The American currency had a strong 2022, although it lost momentum in October and started to pull back against a broad basket of currencies. If the global economy suffers a serious hit in 2023, money may move back into the safe-haven U.S. dollar, which will be bearish for gold.

It remains to be seen whether traders are ready to increase purchases of gold as a safe-haven asset. In 2022, safe-haven demand for gold existed in February and March, when traders focused on geopolitical tensions. Later, the combination of stronger dollar and rising yields put significant pressure on gold and other precious metals, and traders were not ready to use them as safe-haven assets.

Gold Has A Good Chance To Move Towards The $2000 Level In 2023

Back in November, gold managed to get out of the downside channel and is trying to develop additional upside momentum. A move above the $1830 level will push gold towards the resistance at $1875 on the weekly chart. In case gold settles above $1875, it will head towards the next resistance at $1915. A successful test of this level will open the way to the test of the resistance at $1965.

On the support side, gold needs to settle below the $1775 level to have a chance to gain material downside momentum. A move below this level will push gold towards the support at $1730. If gold declines below $1730, it will head towards the support at $1700.

From a big picture point of view, gold managed to get out of the strong downside channel and is trying to develop sustainable upside momentum. If the Fed is not too hawkish, gold should have a good chance to move towards the $2000 level in 2023.

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