By Barani Krishnan
Investing.com – Gold bulls got the record high they wanted after a nine-year wait, but analysts and technical chartists say the big payday — $2,000 an ounce — has yet to come and looks more certain than ever now.
on New York’s Comex settled up $33.50, or 1.8%, at $1,931 per ounce. The session peak of $1,941.65 rewrote Comex’s September 2011 record high of $1,911. 60.
, a real-time indicator of trades in gold bullion, was up $38.11, or 2%, to $1,939.26 by 2:10 PM ET (18:10 GMT). The session peak of $1,945.69 also reset the all-time high of $1,920.85 for spot gold from September 2011.
“For gold, $2,000.00 an ounce is the next target, and I wouldn’t be surprised to see it achieved relatively quickly,” Jeffrey Halley, senior markets analyst in Sydney for New York-based OANDA, agreed with that observation.
Sunil Kumar Dixit, an independent precious metals analyst and chartist, said gold may capitulate to the bears above the psychological pillar point of $2,000, which may only happen after the $1,955 level is taken out decisively.
“A fierce short covering” is yet to be witnessed,” Dixit wrote.
“If profit booking causes a daily and weekly price reversal top with respective close below the $1,900 handle and $1,880, look for lower value area cluster zone $1,818 horizontal support or the $1,790 which is 50 Day EMA (Exponential Moving Average) and $1,740 the 100-Day SMA (Simple Moving Average.”
On the upside, he said a sustained move could set record highs of $1,955 and beyond, which the bulls will take to the $2,000 strategic new benchmark.
But Dixit adds that if gold remains undeterred on the way up, “mathematical calculations suggest $2,127 as next destinations for the upcoming bull rally”.
While the $2,000 target appears more achievable by the day for any of these contracts, some analysts warn that gold appeared hugely overbought. Yet, in the same breath, many say it could go even higher.
“Overbought markets can be complicated things: While the backdrop is less assuring for continuation, there’s usually a reason for why the market became overbought in the first place. And, those reasons can certainly continue … and continue and continue, just as we’ve seen in gold.” said James Stanley, a gold strategist who blogs at Daily FX.
The gold rally comes on the back of low interest rates and trillions of dollars of Covid-19 stimulus passed by governments and global central banks that have debased the dollar and other conventional currencies and heightened inflation fears — a situation which investors typically hedge by buying gold.
Republicans led by President Donald Trump have finalized the fourth coronavirus relief bill, worth about $1 trillion, that will provide temporary and reduced extension of unemployment benefits, another round of stimulus checks, liability protection for businesses, and funding to help schools restart. It will also include $16 billion in new funds for testing and tax incentives to encourage companies to rehire employees.
Gold’s strength has also been underpinned by a slump in the dollar this year. The , which measures the performance of the greenback against six major currencies, has slid steadily from 17-year highs of 103.96 in March to below 94 now, its lowest in almost two years.
Gold wasn’t the only precious metal to benefit from the weak dollar and Covid-19 stimulus.
Silver, the second most-actively traded precious metal on Comex, hit seven-year highs, rising 35% on the year, versus gold, which has only gained some 26%.
settled up $1.651, or 7.2%, at $24.501 per ounce, after peaking at $24.797. That was the highest for any benchmark Comex silver contract since the $24.510 high set in August 2013.