Gold floats above short-term key levels past $1,800
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Gold stayed mildly bid around weekly top before Christmas Eve.
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Risk-on mood battles recently firmer yields to test buyers.
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Sellers need to conquer strong hurdles to retake controls.
During the holiday week, not much happens in the marketplace. Investors focus on two things right now: whether Democrats will be able to pass Biden’s spending bill in the face of Senator Joe Manchin’s opposition, and whether the coronavirus Omicron variant will trigger new restrictions and hamper economic growth. After all, this strain has already become the dominant one in the US, but its effects are not yet known. Like most of 2021, gold has been rubbing against $1,800 this week but did not have the strength to permanently rise above this level. Despite a surge in inflation and very low real interest rates, the yellow metal didn’t rally.
However, maybe it’s not gold’s fault, but our too high expectations? After all, gold had to compete with cryptocurrencies and industrial metals (or commodities in general), both of which performed exceptionally well during periods of high inflation. Despite all the Fed’s hawkish rhetoric and tapering of quantitative easing, gold didn’t break down. Hence, it all depends on the perspective. The same applies to historical analyses and forecasts for 2022. The bears compare the current situation with the 2011-2013 period. The 2020 peak looked like the 2011 peak. Thus, after a period of consolidation, we could see a big decline, just as it happened in 2013.
On the other hand, gold bulls prefer to compare today with 2015, as we are only a few months away from the Fed’s interest rate hikes. As a reminder, gold bottomed in December 2015, so the hope is that we will see another bottom soon, followed by an upward move.
Short Term Outlook
Gold rose for the second week in a row and finished slightly below $1810 after rebounding from $1783. It was unable to hit fresh monthly highs. The yellow metal continued to improve its outlook, with a close above the 55-week simple moving average. The upside continues to face resistance around $1810/15. A break of that area should clear the way for a test of the next critical level seen at the $1830 region.
The immediate short-term support could be seen at $1793 followed by the 20-day simple moving average at $1784. A daily close under $1780 could anticipate more losses and a potential slide to $1750.
