Is this a breakout for gold price or just an oversold rally? – Kitco NEWS

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(Kitco News) Gold kicked off December with two consecutive daily gains, which pushed the precious metal above $1,830 an ounce on Wednesday. Is this price action the start of a new bull run for gold, or is it just recovering after a steep drop last week?

There is a mix of drivers supporting gold’s short-term move up, including a weaker U.S. dollar, which hit a 2.5-year low on Wednesday.

“The meltdown in gold has likely run its course, leaving the market with fewer traders long, although the remaining gold bugs now hold larger than average position sizes, flagging they are higher-conviction traders,” said TD Securities strategists on Wednesday.

Last week’s drop below $1,800 an ounce seems to have triggered a recovery as investors re-engage with the metal, analysts said.

“On one hand, we know gold was grossly oversold and had diverged from real rates and USD weakness, so the flush out had played out, and the relationship wasn’t going to breakdown forever. There has been some selling in the crypto space, so whether that has had a hand in pushing up gold et al is unclear,” Pepperstone head of research Chris Weston said on Wednesday.