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Let’s take a quick look at a few technical arguments that may be drawing more traders back into gold in the new year!

Gold vs. USD

Gold vs. U.S. Dollar Daily Chart
Gold vs. U.S. Dollar Daily Chart

What a year for the gold bulls in 2020, with most of the gains coming in the first half after the initial selloff in March after the coronavirus began.

After dropping -14% from $1700 to $1450 during the financial market meltdown, gold rallied a remarkable +42% before topping out just under $2100 at the beginning of August 2020. The likely driver was the big fall in the U.S. dollar and bond yields through out 2020.

From there, traders began to focus on the recovery/vaccine narratives that drove up risk assets like equities and crypto, and it’s likely that with no additional stimulus come from central banks or governments, gold began to lose its luster.

It wasn’t until we saw support at the 50% Fibonacci that the bulls began to take back control, which happens to correlate with rising speculation of more U.S. government stimulus coming in December / further weakening of U.S. dollar.

After the December rally, it looks like the falling ‘highs’ pattern has been broken, which brings on the question, “will traders jump in on this technical setup and bring bullish momentum to the shiny yellow metal?

Gold vs. S&P 500

Gold ETF (GLD) vs. S&P 500 ETF (SPY) Weekly
Gold ETF (GLD) vs. S&P 500 ETF (SPY) Weekly

Besides a potential breakout against the Greenback, Gold bulls may come from the equity markets as it looks like its bearish relationship may be overextended.

On the weekly chart above of the gold ETF GLD vs. the S&P 500 ETF SPY, we can see the pair in a familiar pattern of retesting the rising lows. And over the past couple of years, this pattern when combined with an oversold Stochastic signal preceded a bullish run for gold.

Could that be the case once again? Well, if the global outlook continues to worsen as a the coronavirus surges, it’s possible that some traders may take their equity profits and move them into the “safe haven” gold market.

Gold vs. Bonds

Gold ETF (GLD) vs. Vanguard Total Bond Market Index ETF (BND) Weekly
Gold ETF (GLD) vs. Vanguard Total Bond Market Index ETF (BND) Weekly

Gold has been on a heck of a run against the bond market over the past two and a half years, rallying over 50% at its peak from the bottom back in August 2018.

Much like its performance against the Greenback this year, gold took a step back against bonds in the second half of 2020. And once again like its rally in December against USD, it rallied against bonds to eventually break above the falling ‘highs’ pattern. Will this breakout draw in technical gold traders away from bonds and continue the longer-term rally higher?

What do you guys think? Is gold set to make a new move higher? 

Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.