Gold price is up for the second consecutive day as investors react to the overall weaker US dollar and cryptocurrencies. The metal is trading at $1,823, which is substantially higher than this week’s low of $1,765.
Gold is mostly traded in dollars, which makes it have an inverse relationship with the greenback. As a result, the precious metal has received a boost in the current dollar decline. As I wrote earlier today, the dollar index has crashed to the lowest level since April 2018. This happened as potential risks in the market eased as the stimulus debate continued in the US.
And, the weaker dollar is here to stay, according to analysts at Goldman Sachs. In an interview yesterday, an analyst predicted that the currency will drop by about 6% in the coming year.
Gold price is also falling because of the overall performance of Bitcoin and other digital currencies. After starting the week on a stronger footing, the currencies took a deep dive yesterday. While Bitcoin price has pared some of the losses, it is still 378 lower than its highest level yesterday. Ethereum, Bitcoin Cash, and Litecoin prices have also fell by more than 1%. As such, the price of gold is possibly rising as some investors move from crypto to Bitcoin.
Gold price technical outlook
Turning to the weekly chart, we see that gold price has been on an overall downward trend after peaking at $2,070 in August. Specifically, it has dropped by more than 12% during this period. The price has also managed to move below the 23.6% Fibonacci retracement level. During this trend, it has managed to clear the 25-week EMA and is now at the same level as the 50-week EMA.
Therefore, this two-day rise seems to be a dead cat bounce, which means that the downward trend will continue. If it happens, the price will possibly drop to the 38.6% retracement at $1,700. The invalidation point for this trend will be at the $1,900 level.
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Gold technical chart
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