Gold rises as weaker dollar, recovery fears lift demand
· Gold rose on Thursday on a softer dollar, consolidating further above the key $1,900 level, with an ultra-low interest rate environment and worries over global economic fallout from mounting Covid-19 cases underpinning its safe-haven appeal.
· Spot gold was up 0.6% at $1,928.94 per ounce by 0516 GMT, a day after slipping below the $1,900 level in choppy trade. U.S. gold futures eased 0.5% to $1,939.79.
· “The fall that took gold below $1,900 has flushed out a lot of weak longs and it looks like now we’re going for a bit of consolidation and gold is preparing for another move higher,” said Michael McCarthy, chief strategist at CMC Markets.
· “The outlook remains positive in a lower interest rate environment, particularly with the weakening U.S. dollar. The settings are unchanged, we’re seeing record amount of stimulus and have real fears about the risks to growth.”
· The dollar slipped 0.2% against rivals, making gold cheaper for holders of other currencies.
· Gold, which pays no interest, also benefits from low interest rates as this reduces the opportunity cost of holding bullion.
· Adding to worries over the economic toll from the pandemic, U.S. Federal Reserve policymakers warned U.S. economic growth would be muted until the virus was contained.
· “Gold also continues to garner support from the pandemic as it continues to impact global economic growth and is dovish for central bank policy,” Phillip Futures’ analysts said in a note.
· Massive money-printing by global central banks have helped gold rise about 28% so far in 2020 as the metal is considered a hedge against currency debasement and inflation.
· Investors are now waiting for a breakthrough in stalled U.S. stimulus talks while keeping a close watch on frayed U.S.-China ties ahead of key trade talks scheduled on August 15.
· Gold Price Forecast – Gold Markets Showing Signs of Major Support
The gold markets broke down on Wednesday but found the 50 day EMA to be supportive. By doing so, we are forming a hammer which of course is a very bullish sign.
Gold markets have broken down just a little bit during the trading session on Wednesday, reaching towards the 50 day EMA before recovering again. Now that we are above the $1900 level, it looks like we are ready to continue to go higher. Ultimately, this is a market that I think will go looking towards the highs again, but we needed to scare off the “weak hands” in the marketplace. Furthermore, a lot of this may have been due to the US dollar surging higher during the trading session on Tuesday. We have seen that move pull back just a bit, and that has been reflected here as well.
· Gold Price Prediction
Having said all of this, it will take several days for the market to regain the confidence to take the highs out, and of course the $2000 level will be slightly psychologically important. However, if we were to break down below the 50 day EMA it is likely that we would drop to the $1800 level next. I do like the idea of buying gold and I think that we are in a longer term cyclical bull market, so I will not be a seller.
I even noted this a few days ago that we could see some type of major sell off, but I was not going to be part of it. Simply collecting profits and then buying when gold is “on sale” makes the most sense. This looks like a very vibrant candlestick that suggests that we are ready to continue going higher if you have the wherewithal to hang on to what will more than likely be a choppy move.
· Elsewhere, silver rose 1.2% to $25.86 per ounce, platinum gained 0.7% to $937.35 and palladium climbed 1.4% to $2,159.24.
Reference: CNBC, FXEmpire
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