- Gold price has been in a strong rally in the past few weeks.
- The price gained after Democrats won in the Georgia by-election.
- The technical analysis reveals that the price will continue to rise.
Gold price has been in an upward trend in the past few weeks. It has risen by more than 10% since November, reversing some of the prior months’ losses. On Wednesday, the metal rose to a high of $1,935, which is the highest it has been since November 9.
Democrats sweep positive for gold
The Democratic party managed to win the Georgia by-election. Its two candidates, Jon Ossof and Raphael Warnock, managed to beat the incumbent Kelly Loeffler and David Perdue. This victory means that Charles Schumer, the New York Democratic Senator, will now be the Senate majority leader.
The electoral victory came on the same day ADP released relatively weak job numbers. The data showed that private employers in the United States slashed more than 123,000 jobs in December. That was lower than the expected addition of more than 88,000 jobs. These numbers came two days before the official nonfarm payrolls data from the US.
As a result, economists believe that Democrats will be more incentivized to provide more stimulus to support the economy. Indeed, before the data, the House of Representatives had already voted on a package that will include $2,000 in additional checks. And before the recently-passed $900 billion stimulus package, they had passed another $2.2 trillion package that failed in the Senate.
Increased stimulus tends to favor gold prices in several ways. First, the large money in the economy usually debases the currency, which is usually a positive thing for gold. Second, it means that the Federal Reserve will not have the incentive to provide more stimulus from its side.
However, in the long-term, some of Joe Biden’s policies will likely have a negative impact on the price of gold. For example, he has pledged to raise taxes on the wealthy and companies, which could slow the economy. He has also pledged to raise the minimum wage and boost regulations, which could affect these prices.
Gold and Bitcoin prices
Meanwhile, the gold price has risen even as the price of Bitcoin has reached an all-time high. On Wednesday, the digital currency rose to more than $35,000. This means that the currency has risen by 788% from last year’s low of $3,700. In the same period, gold has jumped by only 33%.
Some analysts cite Bitcoin as the reason why the gold price has lagged. That’s because more institutional investors have moved their money from gold to Bitcoin. This is evidenced by the recent inflows in Bitcoin funds compared to outflows in the biggest gold exchange-traded funds. Therefore, a resurgent Bitcoin will likely have a negative impact on the price of gold.
Gold price technical outlook
The daily chart reveals several things about the price of gold. The price dropped last year when the World Health Organisation (WHO) declared coronavirus a global pandemic. It then bounced back after the Fed slashed interest rates and boosted its quantitative easing program. This pushed it to an all-time high.
Between August and December, gold formed a descending channel that is shown in blue. And last week, bulls managed to move above the upper side of the channel. It has also moved above the 50-day and 100-day weighted moving average. Further, the cumulative volume index indicator has continued to rise.
All these are signs that bulls are in control. This means that the path of least resistance is higher and that the price will possibly target the next resistance at $2,000.