Gold Futures: Fiscal stimulus bill to provide a catalyst for bulls – Charles Schwab


After a rough August and September where the December gold contract (GCZ20) declined $240.00 or nearly 11.5%, prices seem to have found support near the $1850.00 at the end of September and have moved higher in the last 7 trading days. Currently, lawmakers are working toward a stimulus bill, which if passed may provide a catalyst for gold bulls.On a technical basis, the 2o-day Simple Moving Average (SMA) crossed below the 50-day Simple Moving Average (SMA). To technical traders, this can signal a bearish shift in momentum, as per Charles Schwab.

Key quotes

“Traders consider the passage of another round of stimulus to be bearish for the dollar and also inflationary, two bullish conditions for gold. As the dollar declines, it takes more dollars to buy the same amount of gold, and some see gold as a better store of value when inflation is on the rise. However, a lack of compromise may leave gold bulls waiting for another catalyst and prices may continue to languish.”

“The contract is currently trading under the 5o-day SMA and just under the 20 SMA. The 2o-day SMA also lines up nicely with a price support level in the $1920 zone, where the price was supported during the month of September. However, since the price of gold broke the $1920 support level, technical traders will now consider the $1920.00 as resistance. If the price of the December contract is pushed above these levels bulls may wrestle away control of the momentum. Conversely, a lack of follow-through above these resistance levels may lead to more downside pressure. Traders may want to look to the $1850.00 zone as the next level of intermediate support.”

 

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