Technical analysis

Gold prices moved higher but continue to trade in a tight range. Support is near the 10-day moving average near 1,872, with resistance seen near the December highs at 1,906. The 10-day moving average crossed above the 50-day moving average which means a medium-term uptrend is now in place.  Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum is positive to neutral as the MACD (moving average convergence divergence) histogram prints in the black with a flattening trajectory, which points to consolidation.

The House Votes to Increase Federal Payments

The House voted to increase the second round of federal direct payments to $2,000 as Democrats embrace President Donald Trump’s calls to put more money in Americans’ pockets. The measure would boost the stimulus checks in the year-end coronavirus relief and government funding package to $2,000 from $600.

“Gold Price Prediction – Prices Rise on Moving Average Crossover”

Gold price 2021 outlook

Despite the liquidity flooding the financial markets, the inflation outlook in major economies remains subdued and major central banks voiced their commitment to keeping their policies extremely loose until they see a convincing increase in price pressures. This suggests that investors will not give up on gold in the near future.

On the other hand, a return to normality with mass COVID-19 vaccinations could make risk-sensitive assets more attractive, especially in the second half of 2021, and dampen the demand for the yellow metal.

Overall, the gold price outlook remains bullish with the rate of increase in prices softening when compared to 2020.

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On Thursday, February Comex gold futures are trading $1882.60, up to $4.50 or +0.24%.

President Trump is generating a buzz in the market with his demand to increase the size of the stimulus package passed earlier in the week, but gold traders seem to be shrugging off the news. Investors largely brushed off reports that U.S. lawmakers blocked attempts to alter a $2.3 trillion coronavirus aid and government spending package.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1912.00 will signal a resumption of the uptrend. The main trend changes to down on a move through $1820.00.

The minor trend is also up, but momentum may be getting ready to shift to the downside with the formation of a potentially bearish closing price reversal top on December 21.

A trade through $1859.00 will confirm the closing price reversal top. This could trigger the start of a 2 to 3-day correction or even a change in trend if $1820.00 is violated.

Besides the below-average volume, this week’s choppy price action has been fueled by a series of retracement levels.

The short-term range is $1973.30 to $1767.20. The market has been straddling its retracement zone at $1870.30 to $1894.60. This zone is controlling the near-term direction of the market.

The minor range is $1820.00 to $1912.00. Its retracement zone at $1866.00 to $1855.10 is additional support. This zone stopped the selling on Monday.

Another short-term range is $1767.20 to $1912.00. Its retracement zone at $1839.60 to $1822.50 is the last retracement zone support before the main bottom at $1820.00.

Near-Term Outlook

The recent analysis of price action suggests the near-term direction of the February Comex gold market will be determined by trader reaction to the retracement zone at $1870.30 to $1894.60.

Look for an upside bias to develop on a sustained move over $1894.60 and a downside bias to develop on a sustained move under $1870.30.

The way of least resistance is to the upside with $1912.00 a potential trigger point for an acceleration. A move under $1870.30 could be a little labored with potential support levels lined up at $1855.10, $1839.60, and $1822.50.

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The sellers returned after the metal-faced rejection at the 50-daily moving average (DMA), now at $1875.

On Wednesday, gold fell as much as 1% to near the $1825 region and spent the rest of the week meandering near the latter, with the upside attempts capped by the 21-DMA of $1841.

Gold Price Analysis: XAU/USD’s daily chart clearly shows that the price continues to oscillate in a defined range. Acceptance above the 50-DMA is critical to reviving the recovery momentum from four-month troughs of $1765.

Meanwhile, the 200-DMA support at $1809 is the level to beat for the bears. The 14-day Relative Strength Index (RSI) settled the week at 47.01, keeping the odds for additional downside alive.

However, the Fed’s final monetary policy decision of this year and a likely US fiscal stimulus deal could have a significant impact on the gold price action in the week ahead.

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Although global vaccine producers are on their way to get regulatory approvals from the US and the UK, the surge in the covid numbers hasn’t faded yet, which in turn keeps the market players worries unless the cure to the pandemic rolls out. Also portraying the virus pessimism is the record high hospitalization rate in the US as well as the latest resurgence in Asian countries like Japan and India.

“Gold is consolidating Friday’s bounce from the long-held support at $1850, buoyed by a broadly weaker US dollar, courtesy of the covid vaccines-led optimism.”

Additionally, challenges to the soft Brexit, due to the disagreement over the key issues including fisheries, governance and competition rules, joins the doubt over the future of the Federal Reserve’s emergency lending program to weigh on risks. Furthermore, US President Donald Trump’s tiring efforts to stop the President-elect Joe Biden from reaching the White House also add to the market’s lack of clarity and sour the trading sentiment.  “Covid data, uncertainty over Fed’s emergency program battle optimism concerning virus treatments, Brexit. Gold bounces off intraday low of $1,868.90, keeps pullback from the previous day’s top surrounding $1,880.”

Amid these catalysts, S&P 500 Futures wobble around the mid-3,500s with no clear direction. It should also be noted that markets in Japan are closed for the day and hence fewer moves are expected unless any surprises erupt from the risk front.

“Gold Price Analysis: XAU/USD holding onto critical $1871 level amid vaccine progress – Confluence Detector”

Though, the preliminary readings of November month’s activity numbers for the leading economies, like the US and the UK, will be important to watch for the day.

Considering the bullish MACD signals, gold buyers are likely aiming at the one-week-old falling trend line and 10-day EMA joint, around $1,879-80, during the further recovery moves. However, the $1,900 round-figure can restrict the metal’s short-term upside. On the contrary, the $1852/48 support area, comprising the recent lows and May’s bottom, becomes the key support to watch if the bullion turns to the south.

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