Gold鈥檚 mega rally took another upturn on Tuesday as it surpassed another major hurdle at $2,000 per ounce.
Spot gold advanced 1.4% to $2,004.97 per ounce by 3:20 p.m. EDT, after reaching an intraday high of $2,009.20 earlier.
Bullion has surged more than 30% so far this year and is one of the best-performing assets in 2020
Bullion has surged more than 30% so far this year to a record high and is one of the best-performing assets in 2020 as a result of increased safe-haven demand during the coronavirus pandemic.
Investors are driven by the belief that the metal will hold its value better than other assets as fallout from covid-19 ripples through the global economy.
In the US, the world鈥檚 largest economy, central bank stimulus has pushed inflation-adjusted bond yields to record lows, making non-yielding gold more attractive. The dollar has also weakened sharply, making bullion cheaper for buyers with other currencies.
Gold breakout
鈥淭he never-before-reached $2,000/oz is a major psychological resistance level, with gold鈥檚 49-year trend channel resting just below it at $1,983,鈥� said .
鈥淥nly an end-of-month or, better yet, end-of-quarter close above these levels will signal a break from the channel,鈥� she added.
However, because the rally has been so fast, a downward correction is likely and could be brutal, analysts said, before the market attempts another stab higher.
Early support is coming in around its 20-day moving average at $1,875 and the bottom of its 4-month uptrend around $1,830.
鈥淏elow that is more powerful support at the 20-week moving average, currently at $1,755,鈥� said Tom Pelc, an independent technical analyst, formerly of Nomura and RBS.
Such a fall would not necessarily equate doom the longer-term uptrend, analysts posited.
鈥淲e continue to see this improving volatility backdrop, so there鈥檚 no sign that the long-term trend is changing,鈥� said Richard Adcock, a former UBS and now independent technical analyst. 鈥淭he market can carry on higher than people expect.鈥�
If resistance is broken, Fibonacci extensions offer short-term targets. These are based on the idea that a rally will extend in predictable proportions extrapolated from a previous rally.
鈥淥ne is at $2,067, another comes in at $2,286,鈥� said Pelc.
鈥淟ucas ratios 鈥� a tool using a sequence of numbers similar to Fibonacci鈥檚 鈥� suggest gold could rise to $3,598.80 an ounce in 4-5 years,鈥� he added.
(With files from Reuters)