Gold Analysis – Year in Review and Forecast

Regardless of the beginning of the uptrend on January 1, 2016, and the beginning of the new motive wave on August 27, 2018, the true excitement started on March 17, 2020. The hike of March 17 this year was similar to the one on August 12, 2010, when the US Dollar collapsed.

This year, when the new coronavirus was spreading in drastical speed and caused a Global pandemic, Gold hit the new ATH at $2072 on August 06, 2020. Central Banks of some countries when the pandemy started filled their basket with Gold. Turkish Central Bank is among the record purchasers of Gold since 2017, in 2020 the state bank has added 155.4 tonnes to it’s reserves, next goes India with 35.2 tonnes, and the most aggressive Gold buyer Russia is on third place with 27.4 tonnes, next UAE with 23.9 tonnes. China, who is the world’s leader in gold production and a purchaser of the astonishing 708.2 tonnes in 2015 and 95.8 tonnes last year, remained silent this year.

The World official holdings as of December, 2020 are as follows, countries only, does not include commonwealths and international banks:

1. The United States of America: 8,133.5, which is 79.3% of the total currency reserves
2. Germany: 3.362.4, which is 79.3% of the total currency reserves
3. Italy: 2,451.8: which is 71.2% of the total currency reserves
4. France: 2.436,1, which is 66.4% of the total currency reserves
5. Russian Federation: 2,298.5, which is 23.8% of the total currency reserves
6. People’s Republic of China: 1,948.3, which is only 3.6% of the total currency reserves.

Data of the World Gold Council

See the diagram below, which better reflects the official quarterly gold reserves change since Q1 2000 upto Q3 2020.

The new year ahead might surprise with the new Gold-bull-movement as countries which opened the border during the pandemic are going for another lockdown amid a spread of the new virus strain. The long-awaited $2.3 trillion pandemic aid was signed by President Trump and that did not hit the US Dollar Index as much as it did during March 27, 2020 when the first stimulus bill, the so-called $2.2 trillion Cares Act was signed by President Trump.

Hence there was no hike of the Gold as it was on March 27, 2020. Positive news around the Globe, Brexit deal, vaccine distribution hold investors from purchasing Gold, however continuing tensions between the US and China and the new Covid-19 variance still keep the XAU/USD rate $1850. The situation may worsen as the signed $2.3 trillion pandemic aid includes measures to further bolster support for Taiwan and Tibet.

As for now, Gold is near the upper threshold of the descending channel. The precious metal against the US Dollar hit the dynamic resistance and retraced, however still keeps above the decisive level of $1850.

As seen on the 4H chart above, XAU/USD did not sharply drop after the test of the dynamic resistance and the static resistance, hence it is assumed that the price will break the resistance and continue upwards. Indicators on the same 4H chart demonstrate that Gold may continue the uptrend, MACD is over the signal line and RSI doesn’t show that the metal is overbought, Both simple moving averages 100 and 200 do support the uptrend and EMA50 has touched the price and is keeping below it, supporting the uprend.

By the time of writing of this article the XAU/USD quote on Overbit is at $1880 and has formed a triangle. Gold is above the lower edge of the triangle, though keeps near it, if the lower edge of the triangle is broken, the price will drop to $1859 – $1855, though should keep above $1850 for a bullish attune.

If the pair breaks above the upper edge of the triangle and the upper threshold of the descending triangle, it will proceed towards $1915, after a slight correction at $1906. An hourly chart has all three Moving averages concentrated at the price level, RSI and MACD still signal the bullish. Upcoming economic releases from the US will play a significant role on the price action.

Follow these data releases closely as they will conclude the year trend of the pair and will signal the price action after the Holidays:

December 30, US Pending Home sales as per November is expected to be higher than in October.

December 31, Initial Jobless Claims, expected to be 30K higher than the previous released 803K.