2020-12-27 • Updated
Do you remember last December? Back then, there were halfway solved uncertainties related to the US-China trade deal and long-lasting disputes over the post-Brexit relations between the United Kingdom and the European Union. With plenty of this and plenty of that, the gold was still higher than in 2019. Now, let’s go back to the end of our officially confirmed worst year of modern history. Who thought that everything could be even more uncertain and trigger a slowdown of major economies? The outbreak of Covid-19 has messed everything up. It made the Fed start a new round of quantitative easing and pushed the US regulator to cut the interest rate close to zero. As a matter of fact, the king of reliability – the US dollar has weakened. At the same time, the king of stability – gold has surged to new highs. 2020 was indeed a magnificent year for metals, especially for gold. What do analysts expect from the upcoming year? Will the gold shine brighter?
The worsening situation with new coronavirus across the globe pushed the yellow metal above the all-time high of 2011 and marked a new high at 2 074 in August. Since then, the precious asset has corrected on the improving risk sentiment. On Christmas, December 24, it closed near the 50-day SMA at the key resistance of 1 880. The next near-term obstacle for buyers lies at the descending trendline at 1 900. The breakout of it will increase the chances of reaching 1 930 and 1 960. For sellers, key support points are placed at 1 820 (200-day MA) and 1 760.
Of course, one of the biggest questions for traders is whether the gold will make a new high or form a new downtrend. The answer depends on three main issues. Firstly, how successful and quick the distribution of anti-covid vaccines will be. The vaccination process has already started in many countries, but some vaccines have not been tested in a real environment and may provoke allergic reactions. Another issue is mutations of a new virus, which can be even more dangerous. Finally, the third issue is the economic situation in the biggest countries. If the economies recover quicker, the gold will fall down.
According to Capital Economics, the existing problems will still add pressure to the gold in 2021. As a result, the upside momentum will be limited by 1 900 level. As for Goldman Sachs, its potential target for gold lies at 2 300. The reason for that is the possibility of higher inflation after post-coronavirus recovery.
Analysts turn their heads to the silver market, too. Silver has risen greatly from March’s lows at 11.28 to the 2013’s levels at 29.78. Since September, the metal has been consolidating between 25.6 and 23.5 levels. On December 24, the key resistance for silver lied at the descending trendline at 27.4. The next one is placed at 28.4. As for support, the first one was placed at 23.5.
According to the Canadian Bank CIBC, silver will rise as high as 32. Bank of America is bullish as well, as it sees silver jumping to 31! Analysts at Metals Focus also see silver prices pushing well above $30 an ounce next year. All in all, a bullish year for silver is expected.
It's not a secret that metals depend on the economic situation and risk sentiment. Keep in mind that if there is negative news on vaccines, coronavirus, or other disappointing events, the metals will likely rise.
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Hello again my friends, it’s time for another episode of “What to Trade,” this time, for the month of April. As usual, I present to you some of my most anticipated trade ideas for the month of April, according to my technical analysis style. I therefore encourage you to do your due diligence, as always, and manage your risks appropriately.
Bearish scenario: Sell below 1.0820 / 1.0841... Bullish scenario: Buy above 1.0827...
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