Gold remains confined to last week's range amid ongoing skepticism about the Phase 1 trade deal that was reportedly agreed to last week between the U.S. and China. The yellow metal has traded in about a $6 range so far this week.

Even with the rebound in the dollar from the 5-month lows established last week, gold seems reluctant to test nearby supports. I think the resilience displayed by gold in the wake of the trade deal announcement has been impressed. Now it just needs a catalyst to trigger a breakout of the range.

In these types of situations, I typically favor a breakout in the direction of the underlying trend. A glance at the weekly chart suggests the trend is up, even after several weeks of corrective/consolidative activity since the September high was put in.

Spot Gold Weekly Chart

Spot Gold Weekly Chart

I'd still like to see a move above $1500/1501 to ease short-term pressure on the downside and return confidence to the uptrend. On the other hand, last week's low at 1458.68 needs to hold to keep the range lows at 1450.05 and 1445.62 at bay.

Charlie Morris, Chief Strategist at Atlantic House Fund Management and the author of Atlas Pulse is optimistic as well.

"As I write, the gold price is $1,475, up 15% this year having touched $1,550 (+21%) in September 2019. If the current price holds, this will turn out to be the best year for gold since 2010. And as we move into 2020, I bring further good news; this bull market has legs." – Charlie Morris 

Morris is convinced that falling real yields are going to push gold to a fair value of $3386. Further out, when higher premium and an expectation for higher inflation are factored in, the potential is toward $7166.

That makes the present levels seem like a great place to start building positions or adding to existing positions. As mentioned above, short-term risk is pretty limited.


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