Gold Price Bullish Reversal At Risk as It Meets Dynamic Resistance

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Written By: Mircea Vasiu

Jan 12, 2021, 11:42 GMT 11:42

Gold Price

Summary:

Gold price pulled a bullish reversal on the lower timeframes and now meets dynamic resistance. The focus remains on the future direction of the USD.

Gold price bounced from the recent lows after it formed a triangle as a reversal pattern. In the meantime, it meets dynamic resistance on the lower timeframes, given by the upper edge of a falling channel.

We are in the early trading days of the year, and positioning is not obvious at this point. The consensus is that the dollar continues to decline, and thus the price of gold will rise again. However, there are several things to consider when investing in gold.

One is the fiscal policy and inflation expectations. 2020 brought expansionary fiscal and monetary policy, and thus inflation is expected to rise. If that is the case, gold should act as a hedge against inflation. Another is the relationship between U.S. money supply growth and gold. More precisely, the two go hand in hand, and judging by the pace of money supply growth, the price of gold should find support on each and every dip.

Gold Price Technical Analysis

The technical picture remains bearish at this point. While the bounce is welcomed by bulls, the price of gold needs to advance some more to consider the breakout valid. Bears may want to short against $1,900 and target new lows below $1,800, with the focus on the next USD move.

Gold Price Forecast

Written By: Mircea Vasiu

Mircea, MBA in International Business graduating Magna Cum Laudae, trades for a living and contributes to various financial publications for more than six years. He writes about macroeconomics, stock indices, currencies, and most recently ETFs and individual stocks. For the past decade, he’s involved in everything trading related, mostly in the currency market, both with manual and algorithmic trading.