Gold’s mega rally faces $2,000 hur­dle, but for how long?

Cape Breton Post - - BUSINESS - PETER HOB­SON

Gold's rally has halted just be­low $2,000 an ounce partly due to fierce tech­ni­cal re­sis­tance, but an even­tual break above that level is likely, free­ing prices for more record highs, tech­ni­cal an­a­lysts said.

The gold price has surged 30 per cent this year to an all-time peak around $1,975 an ounce and is one of 2020's best-per­form­ing as­sets.

The rally was driven by a be­lief that gold will hold its value bet­ter than other as­sets as fall­out from COVID-19 rip­ples through the global econ­omy.

Cen­tral bank stim­u­lus has pushed in­fla­tion-ad­justed U.S. bond yields to record lows, mak­ing non-yield­ing gold more at­trac­tive, and the dol­lar has weak­ened sharply, mak­ing bul­lion cheaper for buy­ers with other cur­ren­cies.

The never-be­fore-reached $2,000-an-ounce mark is a ma­jor psy­cho­log­i­cal re­sis­tance level, with gold's 49-year trend chan­nel rest­ing just be­low it at $1,983, said Com­merzbank tech­ni­cal an­a­lyst Karen Jones.

Only an end-of-month or, bet­ter yet, end-of-quar­ter close above these lev­els will sig­nal a break from the chan­nel, she said.

“Tighten your stops . . . un­less the top of my range is taken out in a con­vinc­ing man­ner . . . up­side from here is mar­ginal.”

Tech­ni­cal an­a­lysts seek pat­terns and sig­nals in price charts which al­low them to pre­dict and in­ter­pret moves. Traders and au­to­mated trad­ing sys­tems also take prompts from tech­ni­cal sig­nals.

Be­cause gold's rally has been so fast, a down­ward cor­rec­tion is likely and could be bru­tal, an­a­lysts said, be­fore the mar­ket at­tempts an­other stab higher.

Early sup­port is com­ing in around its 20-day mov­ing av­er­age, at $1,875, and the bot­tom of its four-month up­trend, around $1,830.

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.