Precious metals dipped in mid-session but then bounced back strongly to hit fresh session highs. Gold and silver were therefore up for the third consecutive day at the time of writing. Precious metals were supported above all by a weaker US dollar, which fell further on the back of renewed strength for stock markets amid as US indices climbed to new records amid ongoing reflation trade. This pushed FX investors into foreign currencies as well as gold and silver. Bond yields eased off the highs with investors expecting the ECB to signal its intention at its policy meeting this week to keep the current expansive monetary policy stance for a long time to come to support the Eurozone recovery. This should help to keep a floor under government bond prices after yields had recently started to break higher amid speculation that some central banks may soon taper their QE purchases. Indeed, the Bank of Canada reminded us today that it will hold the current level of policy rate until its inflation objective is achieved and that it will also maintain QE purchases.
With gold now trading above last week’s high and having created a higher high relative to its low made at the end of November, and not to mention the fact it held its long-term support at $1800 again as well as the 200-day moving average, the path of least resistance is now to the upside again:
Source: ThinkMarkets and TradingView.com
From here, a run towards $1900 could be on the cards if the bulls manage to hold the broken $1863 level now. Below $1863, the next support is at $1845, the high from Tuesday and where the 200-day average comes into play.
For gold’s longer-term bullish trend to resume, we will still need to see a higher high above $1965, the most recent significant high. So, it is not totally out of the woods just yet, but the technical signs are promising.
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