Gold extends gains to fresh two-week high. What's next

Gold breaks the New York highs

Gold has continued to find a bid in Asia-Pacific trading, rising another $5 to $1868 to top the high in New York.

There has been a non-stop bid since the start of the month. That’s almost wiped out the late-November slump. A return to the Nov 23 high of $1876 would complete the move. That area would also be moderate resistance with the 55-day moving average just above at $1878.

As I wrote at the end of November: December through February is a great time to own gold. The rally has also been boosted by the resurrection of US stimulus talks. In early Asian trade, US Senate Majority Leader Mitch McConnell struck a hopeful (albeit vague) tone on a new package.

I’m optimistic we’re going to get somewhere. But I have no report at the moment about how.

At the same time, it’s no a US-only story. Japan is unveiling another spending package today and the fiscal taps are wide open everywhere. On the monetary side, the ECB will ‘recalibrate’ policy to be easier this week and there’s no sign of rate hikes on the visible horizon.

One negative that might come into play is an end to negative rate talk. The RBA has engineered a soft walk-back on negative rate talk this month and I expect the BOE to do the same after Brexit gets sorted.

Ultimately the declining US dollar is the deciding factor and that should easily add 5-10% to gold prices in the year ahead.

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This article was originally published by Forexlive.com. Read the original article here.