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Gold trades back towards $1,900, which is limiting gains for now
The delay in Trump signing off on the virus relief bill may see aid payments come later but the fact that we are able to put this whole saga behind us is but another step in the right direction for the reflation trade – and for gold.
We are still caught in the midst of holiday trading this week but gold is showing some poise in search of a meaningful break going into January.
Price action today tests $1,900 again and also the 100-day moving average (red line) @ $1,898.19. There is some added daily resistance from the 61.8 retracement level @ $1,888.89 and these put together are limiting gains for now.
Amid thinner market conditions, we could see exacerbated moves but I would argue that gold’s “watershed” moment might only come once we get back into the swing of things – especially with the strong January seasonal factor coming into play.
A break back above the 100-day moving average will bode well for a push towards the November high near $1,965 next before potentially targeting $2,000.
As for the bigger picture, it is still tough to argue against gold staying underpinned going into Q1 2021 at the very least. Central banks are still largely focused on combating deflation and financial risks, thus keeping easy policy well in place.
That sets up a narrative for gold to kick start the new year strongly but baby steps, buyers will have to firstly show their mettle in breaking the key technical levels above.