With central banks around the world unleashing waves of liquidity, there have been heightened concerns that one result will be a decline in the purchasing power of our money. For that reason, a number of investors have been flocking to gold. Even before the COVID-19 crisis, gold prices had been in a solid uptrend, and while prices spiked as the crisis first began, they couldn’t quite get above the $1,650 – $1,700 range. In mid-March even, prices plummeted with just about every other financial asset before quickly recovering. Once again, though, the rally stalled at resistance. This time around, though, the 50-day moving average was strong enough to provide support and after that test, gold finally got the long-awaited breakout that investors had been waiting for.
Gold’s price spiked as high as $1,787 per ounce in mid-April before running out of momentum. When a stock or commodity breaks out above resistance to new highs and then pulls back, the former resistance level should act as support, and that is exactly what we saw this time around. This week, gold bounced right on cue at around $1,700 and has since rallied 2.6%. With the first test of support proving successful, look for gold to now establish a new range with a floor at around $1,700. At least that’s what the technical analysis textbooks would say. Start a two-week free trial to Bespoke Institutional for access to our entire suite of market research and commentary.