GOLD : Aim Higher

(Fri, 18 Dec 2020). Gold has regained its luster in December, charging from $1,765 to the $1,880 area. The metal enjoyed its most recent extension higher after recent Fed commentary bolstered the precious metal’s outlook. With the Federal Reserve likely to maintain its accommodative policyand Congress trending toward another stimulus package, US Dollar weakness and a rise in inflation expectations seem likely.

The byproducts of the current fiscal and monetary policy landscape help to improve the outlook for gold which has been trending gradually lower since August. That being said, gold’s recent recovery has seen the precious metal take aim at overhead resistance around the $1,920 mark. Should bulls break through the zone, it would effectively create an environment that lends itself to break out trading strategies.

Still, the fundamental landscape has been relatively constant for months. While the recent Fed meeting and stimulus package progress seem to have revived the conversation around these factors, they have been in play for months - and will likely remain for longer – so the potential for shorter-term pullbacks remains.

In the event of renewed bearishness, gold may have fresh support to work with. After reclaiming various zones of resistance, the levels might serve as support in the days ahead with a horizontal band around $1,850 acting as the first area of note. Subsequent support might reside along the descending trendline from August, around $1,820.

In the bigger picture, a break beneath the November low near $1,865 would seriously undermine the technical picture as it would establish another lower-low and continue the downtrend since August. Thus, the area is effectively the “line in the sand” for the optimistic outlook at this stage.

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