Monday (January 4) intraday, driven by a weak dollar, gold bulls realized a big explosion. The DOLLAR index weakened further below the 90 level and is now near 89.70. Spot gold surged nearly $25 on the day, just breaking through $1,920 an ounce, its highest level since November 9 last year. This week’s election comes to a head when Congress counts and certifies the electoral College vote on January 6. Investors will also be watching the runoff in Georgia, which will determine who controls the U.S. Senate. On the economic front, heavy data such as the U.S. non-farm payrolls report will be coming in, as will the Minutes of the Federal Reserve meeting.
Gold had its best annual performance in a decade in 2020. Gold hit a record above $2,050 an ounce last August. After consolidating just below $1,900 an ounce in December, gold looks set to hit an all-time high in 2021, analysts said.
The main drivers of gold’s rise remain — fiscal stimulus, loose monetary policy, a weaker dollar, inflation fears and currency depreciation fears. A rise in confirmed COVID-19 cases and slower than expected vaccinations have also sustained the rally.
Spot gold jumped higher in Asia on Monday as bullion surged past $1,900 an ounce and then broke through the $1,910 barrier for the first time since early November. Gold’s intraday rally accelerated further, rising above $1,920 an ounce to a peak of $1,922.33, its highest level since November 9.
Gold prices jumped in early Asian trading on Monday and hit their highest level since November 9, FXStreet analyst Omkar Godbole wrote on Monday. Major resistance to gold is currently above $1,960 / oz.
On a daily chart, gold broke through a five-month downtrend line that connects the August 7 high to the November 9 high and the September 24 low to the November 30 low, Godbol said.
If gold closes above $1,940 an ounce on the day, that would confirm a bullish breakout and open the door to a rally to $1,965 an ounce, the November 9 high, Godbol said. The 14-day relative strength index (RSI) has already broken through resistance at 62.00, which is conducive to the bullish situation.
Godbol added that if gold falls below $1,857 an ounce, the gold bias will turn bearish. The current trend of gold prices is bullish.
After passing the $1,900 an ounce barrier, gold is expected to move higher towards $1,928.00 an ounce, according to Economies.com.
Economies.com said the bullish gold scenario would remain in force for some time to come. Maintaining gold above $1, 875.00 an ounce is important to the bullish target.
Dollar outlook Bearish Gold could see an even bigger burst
The FX168 weekly financial Market Survey, released on Saturday, showed that analysts and traders were bullish on the outlook for gold in the New Year.
Huijin youdao’s cao bowen expects gold to rise this week. Cao Po-wen believes that gold prices will continue to rise this week has a greater probability, after all, the current is still the second wave after the big wave rise in the correction, in the future there will theoretically be a third wave, the target may be around 1940~1966.
Senator Ted Cruz said he would unite nearly a dozen Republican senators to once again challenge Democratic presidential candidate Joe Biden for victory in a crucial election week when Congress counts and certifies the electoral College vote on January 6. Republican presidential candidates Mitt Romney, Sen. Pat Toomey and Lisa Murkowski in 2012 all opposed a joint challenge to Mr. Biden, with Mr. Romney describing it as an ‘excessive ploy.’
Vice President Mike Pence’s chief of staff, Marc Short, said in a statement that Pence welcomed house and Senate members to use their lawful authority to raise objections. “Vice President Pence shared the concerns of millions of Americans about voter fraud and irregularities in the last election,” the statement said.
In addition, analysts will be closely watching the runoff in Georgia, which will determine who controls the U.S. Senate and how much stimulus is expected in 2021.
On the data front, there will be a slew of key economic releases this week, including Tuesday’s ISM MANUFACTURING PMI, Wednesday’s ADP employment data, Thursday’s jobless claims and, most importantly, Friday’s NON-farm payrolls report.
In addition, investors on Wednesday will welcome the minutes of the December FOMC meeting. Investors will be watching closely for any changes in the language on stimulus or economic growth.
Avtar Sandu, senior commodity manager at Phillip Futures, said in a report that fiscal policy is likely to remain loose in the Democratic-controlled Senate, which will weigh on the dollar and favor precious metals.
Oanda analyst Edward Moya said in a research note that the final number of seats in the U.S. Senate controlled by both parties, as well as the bailout measures taken after Biden takes office, will be the next factor affecting gold prices.
Phillip Streble, chief market strategist at Blue Line Futures, said another key factor to watch this week will be the market’s performance in the first five trading days of 2021. He noted that investors are likely to increase inflows into gold.
Kitco senior analyst Jim Wyckoff said the bulls continue to show enough strength to sustain a short-term upward trend in gold prices.
Peter Hug, head of global trade at Kitco Metals, said: “Gold will break its 2020 high. If inflation surges again, gold could well break through the $2,500 – $3,000 range until central banks begin to tighten monetary policy again. But it will take at least another year to tighten monetary policy.”
Analysts at ING said the near-term price action for gold would depend largely on the scale of US stimulus measures and the effectiveness of vaccine launches.
The dollar continued to fall this week on the prospect of additional STIMULUS in the US. In Asia on Monday, the dollar index hit an intraday low of 89.68.
The FX168 weekly financial Market survey, released on Saturday, showed that analysts and traders were broadly 100 per cent bearish on the dollar’s outlook.
‘The pace of the dollar is very heavy,’ says Bart Wakabayashi, Tokyo branch manager for State Street Bank and Trust. ‘It’s going to stay that way until 2021.’
“Gold has done well in technical terms,” said Saxo Bank analyst Ole Hansen. “The weakness of the dollar is backed by the possibility that U.S. consumers will get bigger checks.”
Wenyu Yao, senior commodity strategist at ING, said: “Against the backdrop of uncertainty, investors turned to safety and gold hit an all-time high in 2020. Lower yields and a weaker dollar further boosted the market. “While vaccine-induced optimism remains high, we continue to believe gold will move higher in 2021 in the face of rising inflation expectations and negative real yields.”