Gold price is rising as investors focus on US politics, the relatively weaker US dollar, and actions by central banks. The metal is trading at $1,892, which is above last week’s low of $1,847.
Most investors buy gold for two main reasons; hedge against inflation and as a safe-haven. Others also buy it as a way of diversifying their portfolios.
In recent months, most investors have been buying gold and gold ETFs as a way of cushioning themselves from the impacts of the pandemic. Also, with interest rates so low, most investors believe that inflation will rise. However, recent data has shown that it will take several years for the rate of inflation to bounce back.
Meanwhile, a weaker US dollar has been a positive thing for gold prices. In the past three months, the dollar index has dropped by more than 3.50%. The price has dropped by more than 7% in the past six months, which partly explains why gold prices have been rising.
At the same time, central banks have started buying gold. According to Citi, demand from central banks, who are among the biggest buyers of the metal is expected to continue. The bank expects the demand to rise to 375 tons and to more than 400 tons in 2021. Still, that demand will be lower than that of 2018 and 2019.
Gold prices technical outlook
The daily chart shows that gold prices has been under pressure in recent weeks. The price has dropped from the all-time high of $2,075 to a low of $1847. During this consolidation, it has formed a triangle pattern that is shown in pink. Because of this consolidation, the price is stuck along the 25-day and 15-day weighted moving averages.
Therefore, for today, I suspect that the price will remain within the current narrow range. However, in the next few weeks, I expect that the price will break out lower and possibly test the support at $1750.
Gold technical chart
