The price of gold advanced towards an eight-week trading high on Monday, as traders pilled into the yellow-metal over concerns about rising COVID-19 infections and the threat of more nationwide lockdowns in key G7 countries.
Gold broke through the technically important $1,910 level with ease as risk aversion caused traders to move back into the safety of the popular metal. Interestingly, Bitcoin suffered a twenty percent decline during gold’s advance.
Fears over the upcoming Georgia run-off, and potential implications for US fiscal policy and spending clearly spooked market participants. If we see a blue wave this week, traders could continue pilling into gold.
From a technical perspective, gold looks great at the moment. A number of bullish price patterns look close to be forming. Price action has also confirmed a lack of buying interest below the $1,900 level.
The only concern for gold bulls could the RSI indicator. According to the Relative Strength Index the metal is overbought in the short and medium-term horizon.
Market Sentiment data also shows that traders are not overly bullish or bearish towards the metal at this stage, with some 53% of traders currently short the yellow-metal. With this in mind, gold has plenty of scope to run higher.
Investors will be playing close attention to the metals behavior during the Georgia run-off today. Going out on a limb, I believe that investors could continue moving into gold for some weeks to come if the Democrat party gain control of the U.S. senate.
It should be noted that the opposite is also true if the Republicans seal a victory, with the greenback likely catching a bid, and traders may choose to sell gold and move into riskier asset classes.
Gold Short-Term Technical Analysis
The four-hour time frame shows that an extremely important technical breakout from a falling price channel has taken place, following the early-week breakout above the $1,910 level.
According to technical analysis, the breakout could see the yellow-metal trading towards the $2,000 level while the breakout remains valid, and price stays above the $1,910 level.
Source by ActivTrader.
As mentioned earlier gold is extremely overbough in the short-term, with the RSI indictor generating an overbought reading of close to 80 at the time of writing.
In terms of near-term technical resistance the $1,970 level offers the strongest form of upcoming resistance past the $1,960 level. Above $1,970, the $2,000 and $2,070 levels are key.
Gold Medium-Term Technical Analysis
Looking at the daily time chart, an extremely large bullish reversal pattern will form if price reaches the $2,070 level over the coming days and weeks.
According to the size of the price pattern the price of gold could reach the $2,300 level over the medium-term. The daily time frame also shows that a large cup and handle pattern has been developing over recent months.
Source by ActivTrader.
Technical analysis shows that the mentioned pattern appears to be complete, meaning that gold prices could surge higher at any time. The overall upside projection of the cup and handle pattern is located around the $3,000 level.
If bulls can start to clear the current all-time high, around the $2,070 level then the yellow-metal could go into overdrive.