Gold Rallies on US Dollar Woes as it Seeks a Return to $2,000

The price of gold has rallied 0.75% on the day to trade at $1,925 as the US dollar struggles with the second government stimulus package.

After months of talks, during which the dollar rallied as a deal seemed unlikely, the talks have since been revived. After talks between the House Speaker and Treasury Secretary in the last week, Democrats and the White House have implied that they are closing the gap on their differing stimulus proposals. Legislation is now said to be being drawn up with Republicans upping their agreement to $1.88 trillion, from their original $1.5 trillion offe. This is still short of the Democrat’s $2.2 trillion initial proposal.

Gold has also gotten a boost in recent weeks as inflation continues to stay firm in the developed economies. The US and Europe saw figures co,e in near expectations last week and today’s numbers from the U.K. were also firm, whilst the Canadian release was higher than expected by 0.1%. The data will give traders some concern that with rates in these economies at, or near zero, inflation could be an issue once the virus issue subsides.

A Reuters poll has shown that investors expect gold to average $2,000 next year as weaker demand for gold jewellery and reduced demand by central banks weigh on the precious metal. Gold will still see support as it hard to see how central banks can unwind their stimulus spending and reduce their balance sheets without fostering some level of inflation. 

Gold Price Technical Outlook

The price of gold has rallied to trade at the 50-day moving average, which is also near the highs of October 12th. A break above this level will target the the resistance near $1,960-70 but the price needs a daily close above the moving average first. The Investing Cube team is currently available to help all levels of traders with the Forex Trading Course or one-to-one coaching

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