Gold prices testing key resistance ahead of 2021

Gold prices have continued to rise as the hopes of fresh fiscal stimulus sent the U.S. dollar to its lowest point since April 2018.

Fundamental analysis: Weaker dollar heping gold prices

The dollar index plunged to its lowest mark in more than 2 years after U.S. Senate Majority Leader Mitch McConnell postponed the vote on boosting coronavirus aid checks to $2,000.

Stocks in the U.S. also climbed in expectations of new stimulus and thanks to vaccine rollouts. Moreover, the U.K. became the first nation to approve the use of COVID-19 vaccine developed by AstraZeneca and Oxford University.

The upcoming runoff elections in Georgia on January 5 will decide which political party will have the majority in the U.S. Senate, with investors expecting a larger stimulus from Democrats.

Technical analysis: Testing key resistance

Gold prices are trading nearly 1% higher this week as the buyers probe key multi-month resistance around $1,900. Fresh stimulus aid in the U.S. is providing support to gold prices to head higher into the year-end. 

The descending trend line (the purple line) is trending around the $1,900 mark with a break and daily close above this trend line facilitating a buy signal for gold investors. This would open the door for more gains in the short-term, with the next targets located at $1,960.

Summary

Gold prices ticked higher on Wednesday as the dollar dipped to its lowest mark in more than two years on the hopes of a new fiscal stimulus.