After pausing for a few months, investors’ appetite for bullion recovered momentum and the gold price skyrocketed in the last few days of 2019, jumping well above the psychological threshold of $1,500. The price is now facing the resistance area of $1,520, while the next target is placed at $1,550-$1,555, which was September’s peak and the highest level reached in the last six and a half years.
The reasons for this impulsive rally are not immediately obvious, however there are few, nonetheless. First, we have graphical grounds for this rebound as the price left behind the low volatility compression band that held prices between $1,450 and 1,480 for almost two months, giving a clear directional signal. Moreover, traditionally the first part of the year has often provided positive seasonality for gold. Now it seems that investors are trying to anticipate this movement and it has now moved into the final part of the year. The slowing down of the greenback is another positive element for gold as the Dollar is negatively correlated with bullion. All these reasons help explain bullion’s rally of bullion, particularly in a scenario where investors’ interest is lifted by central banks’ record appetite for gold.
