Gold prices testing key resistance ahead of 2021
- The dollar index plunged to its lowest mark in more than 2 years, helping gold prices to move higher
- Gold is still holding up incredibly well at these price levels - market analyst
- The buyers probe key multi-month resistance around $1,900
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.
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“The U.S. dollar index touched a new low – that’s working in favour of the gold and silver markets,” noted Kitco Metal senior analyst Jim Wyckoff.
“However, upbeat risk appetite in the market place, evident by stock indexes at or near record highs is tempering buying enthusiasm. You’ve got this tug and pull at work right now.”
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 bigger picture is that gold is still holding up incredibly well at these price levels and the fiscal and monetary stimulus will still be there in 2021 as the pandemic is hitting hard in the U.S., Europe,” said Xiao Fu, an analyst at Bank of China International.
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.
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.