Gold price is on a tear higher as it bounced from a possible double bottom. As the U.S. prepares for the transfer of power, the USD continues its decline, and thus the price of gold threatens to reach $2,000 again.
The big question is, what happens after that? At this point, the gold price simply follows the stock market direction. Higher stock market prices mean lower USD, and therefore, the bullish gold price action makes sense.
But gold may have a hard time exceeding the $2,000 level, despite the bullish stock market. According to JP Morgan, institutions dump gold ETFs for Bitcoin, and that should put pressure on the price of gold.
Following the Stock Market Rally
The news that the United States has a new President was highly anticipated by financial markets. The confirmation on Saturday did not trigger any gaps at the opening but did reflect the market’s optimism regarding the new administration.
Even though Biden’s administration comes with higher taxes for corporations, it also vows to increase infrastructure spending and to eliminate trade barriers. Therefore, the stock market rally is poised to continue should we have a smooth transfer of power.
It is still early to anticipate how the transfer of power will take place and what the final structure of the Congress will be. In any case, the USD is the one to first react and gold so far moves with the general dollar’s direction.
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Gold Price Technical Analysis
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