Gold prices have firmly started the new year on a high, shooting up to a fresh eight-week high on Monday, boosted as market players hedge against covid risks, in addition to prolonged expected central bank action.
Here are some reasons as to why XAU/USD can head back above $2000:
Hedge against covid cases spiking: There are some near-term risks to the market which is due to the resurgence of virus cases being reported in parts of the world. The United States is seeing numbers well over the 200K mark daily, UK over 50K, also spiking in Japan, as the country said it would consider declaring a state of emergency in its capital city area.
FOMC action: The central bank of the United States has made it very clear with its intentions to keep rates low for a very long time and to continue pumping money into the economy. Gold thrives with dovish action from major central banks.
Runoff elections: Investors are also watching Tuesday's runoff elections in the U.S. state of Georgia that will decide the control of the Senate. Gold can go higher if the Democrats win the Senate, in expectation that they will have more freedom to engage in adventurous fiscal policy.
Weaker USD: The greenback is on the firm decline, following on after seeing its worst yearly performance since 2017.
Brief technical overview - XAU/USD
Price action via the weekly chart view has formed a bullish flag structure, a breakout has been observed, leading the door for a strong run north. (For more specifics on daily technical analysis and trade ideas etc, check out our membership)
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