International spot gold (Jan. 4) strong higher, with the highest hit $1944.36 an ounce, up about $40, because of the strong market mood swings, gold after the breakthrough on the downlink channel rail unstoppable, but also by this week, the United States senate seats in the last race and electoral votes to confirm the meeting’s influence in the election campaign, safe-haven demand sharply. On the other hand, the continued weakness of the DOLLAR has also given a useful boost to a number of asset sectors, including gold.
It is worth noting that January has historically proved to be gold’s best month, with prices rising for seven consecutive years. For now, staying above $1,900 and the 100-day moving average will keep gold buyers more bullish as the New Year begins.
Tomorrow also brings elections in the US state of Georgia, a seat that will determine whether the US Senate is controlled by a Republican or a Democrat. In both races, the Democratic candidate leads with 49% of the votes counted to 48% for the Republican candidate. The Democratic candidate for the other seat led with 50 percent to 48 percent of the votes counted. Because the election will determine who controls the U.S. Senate and how much stimulus is expected in 2021, it is particularly important for financial markets. 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 assistance measures after Biden takes office, will be the next driver of gold prices.
Dominic Schnider, head of commodities at UBS Wealth Management, said gold was supported by some macro economic data, while the impact of the outbreak on the US and Europe remained large. With the vaccine working, it could be as soon as the second half of the year before things return to normal, he added, meaning that monetary policy will remain loose and investors will choose to hold on to gold as insurance.
Phillip Streible, chief market strategist at Blue Line Futures, said another key issue this week is that investors may be buying gold as a result of asset realignment in the first few trading days of the New Year. “The first week of every year in any market is an indicator of how well the market will perform after that. “Investors tend to think they have a better investment strategy than they did a year ago, and if they think gold will do better this year, they will allocate more gold, and gold will probably do better.”
For now, the aid package’s future development will remain another important driver for gold bulls. Congress has yet to decide whether to raise the $600 check to $2,000. Gold investors also need to keep an eye on brexit and early month activity data. While the brexit trade deal has been good for market sentiment, questions about the future of the relationship between Britain and the EU continue to challenge that sentiment. today
From a technical point of view, a sustained breakout of the 100-day moving average was included as an optimistic momentum indicator, currently around $1894, which is favorable for bulls to break through the downtrend line from August 7, 2020 and currently around $1901. Meanwhile, five-week high support is around $1,891, providing additional support below the 100-day moving average. If gold closes above $1,940 an ounce on the day, this confirms a bullish breakout on the downside channel and opens the door to a $1,965 an ounce (the November 9 high).
Avtar Sandu, senior commodity manager at Phillip Futures, said in a report that if Democrats take the Senate, fiscal policy is likely to remain loose, which would weigh on the dollar and favor precious metals.
According to ING, gold has managed to hit a new high amid plenty of uncertainty. Low interest rates and a weak dollar will push gold higher. “Although the vaccine has made sentiment more positive, gold is expected to move higher this year, buoyed by inflation expectations and negative real interest rates.”