Gold Price Analysis: XAU/USD battles key resistance around $1,900 as bulls brace for 2021

  • Gold gained over 30% in 2020, buyers attack five-month-old falling trend line.
  • Central bankers, US dollar weakness favor gold bulls but Brexit, stimulus hopes probe further upside.
  • Vaccine developments combat surging virus numbers, US politics is in the spotlight.
  • China’s Caixin Manufacturing PMI to decorate Asian calendar, risk catalysts keep driver’s seat.

Gold closed the books of 2020 with a bit over 30% yearly gains while taking rounds to $1,900. In doing so, the yellow metal extends recovery moves from November 30 to combat a falling resistance line from August 07, 2020. Although optimism surrounding the coronavirus (COVID-19) vaccine, Brexit headlines and the US covid aid package favor the commodity buyers, via US dollar weakness, bulls catch a breather in search of fresh clues as virus count keep fears of weak economics on the table.

US dollar bears dominate…

Be it the worsening virus conditions or optimism over the COVID-19 aid package, not to forget the Brexit deal and vaccine hopes, the US dollar had to bear the burden of all in 2020, making it the worst G10 currency during the previous year while taking rounds April 2018 low at last. Also favoring the greenback sellers were the easy money policy of the US Federal Reserve and central bankers elsewhere. The reason could be traced from rallying equities.

Recently, markets concentrate on the US politics where Nancy Pelosi has been re-elected as the House Speaker, which in turn favors the odds of easy money from the upcoming Democratic government. However, Georgia’s run-off can disappoint Democrats given their holdings in the Senate. It’s worth mentioning that the US policymakers are yet to finalize the $2,000 paycheck despite disbursing $600 and have already got President Donald Trump’s go for a bigger amount.

Read: Gold Price Forecast 2021: XAU/USD looks to build on 2020 gains with central banks staying dovish

Other than the US aid package news, global investors can also keep their eyes on the Brexit headlines and the month-start activity data. While the UK’s passage of Brexit trade deal with the European Union (EU) favors the sentiment, doubts over the future relations of ex-neighbors challenge the mood. Talking about activity numbers, after upbeat prints of December’s official PMI, China is up for releasing Caixin Manufacturing PMI data at 01:45 AM, expected to reprint 54.9, ahead of the Western releases.

The virus details suggest the global count keeps climbing with the UK and the US, followed by Japan, gaining major attention amid the recent surge in the cases and the death toll. While vaccinations are on, fears of another round of lockdownside, most of it has already started in Europe, question the mood.

Against this backdrop, Wall Street benchmarks closed 2020 with an upbeat tone with S&P 500 and Dow Jones ending the year at record top.

Moving on, gold traders will follow risk catalysts while also trying to justify any disappointment in data with a further pullback.

Technical analysis

Upbeat momentum indicators join a sustained break of 100-day SMA, at $1,894 now, to favor the bulls eyeing a break above a falling trend line from August 07, 2020, currently around $1,901. Also acting as an upside barrier is December 2020 top near $1,907. Meanwhile, a five-week-old ascending support line near $1,891 offers extra support to the downside past-100-day SMA.

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