The combination of escalating geopolitical tensions, elevated global equity markets, and Dollar volatility transformed Gold into a battle ground for bulls and bears during the most part of Q4.

Political uncertainty, worldwide tensions, and Dollar weakness were the catalysts for higher prices, while optimism over the global economy and prospects of US tax cuts, offset gains.

With the yellow metal sprinting to a three month high on the last trading day of 2017 despite Congress passing Trump’s mammoth $1.5 trillion tax overhaul, bulls could be back in town.

As we head into the first trading quarter of 2018, Gold has already started on a strong bullish note, with prices punching above $1320 as of writing.

Although a heavily vulnerable Dollar is the likely cause behind Gold’s aggressive appreciation, another factor could be geopolitical unrest in Iran stimulating the flight to safety.

Investors should keep in mind that there are numerous other geopolitical risks which could ensure that Gold remains supported.

These risks range from continued sabre-rattling between the US and North Korea, political drama in Europe and Brexit uncertainty.

Another key factor which has the ability to impact Gold outlook is the Federal Reserve’s monetary policy.

Although sentiment remains bullish towards the US economy amid improving macro fundamentals, concerns still linger over the stubbornly low levels of inflation.

With low inflation concerns clouding the prospects of higher rates, there are doubts over the Federal Reserve’s ability to raise US interest rates three times in 2018 and as such, this is likely to support Gold.

Crypto-Currency and Gold

It was interesting how the aggressive increase in demand for Cryptocurrency in Q4 instigated market speculation that Bitcoin negatively impacted investor’s appetite for Gold.

Although Gold and Bitcoin have some similar properties, there are key differences which are likely to attract investors of different mindsets.

Major examples are the extremely volatile nature of Bitcoin compared to Gold, and the fact that Bitcoin, unlike Gold, has no intrinsic asset underpinning it. Consequently, risk averse investors are likely to steer clear of Bitcoin.

Investors should continue paying close attention to the Cryptocurrency space.

If crypto heavyweights such as Bitcoin, Ethereum and Litecoin experience sharp declines, we could see some panic across the board- resulting in an increased appetite for safe-haven investments.

It must be kept in mind that although Gold is currently shining, what happens to the Dollar this quarter will heavily impact the yellow metal’s performance.

A scenario where inflation in the States rises, the Federal Reserve adopts a firmly hawkish stance and market optimism over Trump’s tax cuts are renewed could provide a boost the Dollar, ultimately punishing Gold.

Technical Analysis on XAUUSD(Gold)

With Regards to the technical, Gold is turning increasingly bullish on the daily and weekly time frame after prices conquered the psychological $1300 resistance level.

Technical lagging indicators such as the MACD, support the bullish bias towards Gold with prices currently trading within a bullish channel on the daily time-frame.

Traders may be inspired to take advantage of the dynamic $1300 support level to elevate prices higher towards $1320, and $1333 respectively.

A scenario where Gold breaks above $1333 may signal further upside, with the next key levels at $1340 and $1360, respectively.

If bulls happen to run out of steam and prices depreciate back below $1300, Gold could test $1260 and $1243.