Gold price begins bullish phase as Biden takes office, analysts eye $1,950 level
(Kitco News) The gold market saw an unexpected rally on Wednesday as Joe Biden was being sworn in as 46th president of the United States. Analysts see gold’s move as a possible start of another bull rally.
The precious metal saw a rise of $35 on Wednesday as it climbed from daily lows to new daily highs. February Comex gold futures were last trading at $1,867.70, up 1.49% on the day. Silver also rallied, with March Comex futures last trading at $25.80, up 1.90% on the day.
"It's pretty fascinating because there isn't much new as far as announcements regarding policy. Much of today's rally is just investors believing that you are going to see the Biden administration work nicely with the Treasury in providing a significant amount of stimulus in the first 100 days," OANDA senior market analyst Edward Moya told Kitco News. "The current virus situation is really going to demand much more support for the economy."
This thinking is also accompanied by portfolio readjustments towards gold, noted Blue Line Futures chief market strategist Phillip Streible.
"There is a lot of optimism that Biden could pass additional stimulus measures, make it a priority. People do think that Biden and the Treasury Secretary nominee Janet Yellen are going to produce a lot more accommodative measures going forward. Some portfolio adjusting occurred today," Streible said on Wednesday.
Also, the markets saw the U.S. dollar index dip in and out of the negative territory, and the yield on the 10-year Treasury note edged down a bit on Wednesday morning, added Streible. "We are cautiously optimistic on gold," he said.
Some analysts see this strong move higher in gold as a start of another bull rally that could take gold much closer to the $2,000 an ounce level.
"There is going to be growing expectations that this is possibly another bullish phase. You are going to initially see $1,890-$1,900 level as immediate resistance. The $1,900 level is likely to be short-term resistance this week, and if the rally continues to see strong support, I wouldn't be surprised to see gold at $1,950 by the middle of next month," Moya said.
There is a confidence that Biden is going to try to work with Republicans to deliver the $1.9 trillion COVID relief bill proposal. "As long as we at least get one trillion in stimulus, it is going to be enough to keep the gold rally going," Moya added.
More price gains in gold this week could be a sign that both gold and silver have put in their near-term bottoms, said Kitco's senior analyst Jim Wyckoff.
"Bulls' next upside price objective is to produce a close in February futures above solid resistance at $1,900.00," Wyckoff said on Wednesday.
In the meantime, there is still a lot of uncertainty when it comes to the vaccine rollout, growing case numbers, rising death levels, and new virus variants.
"A lot of coverage starting to focus on virus variants. One of the concerns is that the South African virus strain would potentially become a big problem. The worry is that the mutation is resistant to anti-body neutralization, which means that vaccines might not be able to protect from re-infection," Moya noted. "This raises expectations that we are going to see lockdowns a lot longer, and it will force more fiscal efforts, which will be the backbone for gold prices."