Daily Market Recap - GOLD rises ahead of Biden’s inauguration

Gold is trading significantly higher on Wednesday ahead of Joe Bidens inauguration as the 46th President of the United States. The yellow metal is benefiting from a fresh wave of buying demand as the US Dollar falls back under pressure and markets begin to process the incoming large amounts of stimulus.

The new US administration is expected to continue to inject vast amounts of stimulus in order to aid in the economic recovery process and looks set to continue its loose monetary policy as long as needed. A $1.9 trillion package has been proposed by President-Elect Joe Biden and backed by the incoming treasury secretary Janet Yellen.

The Fed recently stated that it will maintain its highly accommodative approach in its attempt to stem the impact of the covid-19 pandemic and focus on driving up inflation. Quantitative easing is expected to continue for the foreseeable future with over $100 billion in asset purchases per month.

The effects this monetary policy will have on the US economy remains a matter of speculation. A strong devaluation of the US Dollar can be imagined in the long run while the question of rising inflation may also pose a larger problem once interest rates will eventually be adjusted higher. Until then it is likely that gold will continue to remain well supported.

From a technical standpoint, short-term momentum on gold is moving in favor of bulls through the longer-term picture remains neutral on the daily chart. Gold is edging steadily towards its 20-day moving average after breaking through the pivotal 1,848.53 marks with ease. The 1,875.53 level will be the immediate resistance hurdle to test the resilience of todays surge.

(Chart Source: Tradingview 20.01.2021)

On the flip side, failure to cross above the 20-day MA will elicit vulnerabilities in gold and sellers will likely be quick to pounce on the indecision and drive prices back in a line towards the 1,850 handles. The immediate support for gold should fall between 1,848 and 1,850 in the near term.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.