Gold Price Prediction – Prices Rally Breaking Out as Riskier Assets Slide

Gold prices started 2021 on a positive note breaking out and closing near a 2-month high. Risk-off sentiment ahead of Tuesday’s US Senate runoff in Georgia helped buoy the yellow metal. The dollar continued to trend lower, hitting a fresh 34-month low while US yields edged lower. A stricter lockdown in the UK and a slower rollout of COVID vaccines weighed on riskier assets. Housing prices are rising significantly in the middle of the US as people turn away from the coasts due to COVID.

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Technical analysis

Gold prices moved higher, breaking out above trend line resistance and testing resistance near the November highs near 1,950. A close above this level will lead to a test of the August highs at 2,075. Support is near the 10-day moving average near 1,885. 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. The current reading on the fast stochastic is 91, above the overbought trigger level of 80, foreshadowing a correction. Medium-term momentum is positive as the MACD (moving average convergence divergence) histogram prints in the black with a positive trajectory, which points to higher prices.

There is suspense over this widely watched catalyst, which is the US runoff Senate elections. The races are so close that most do not believe there will be a winner on Tuesday. If the Democrats win both seats, they will control the Senate, which is generally viewed as unfavorable for riskier assets.