Gold about to see the biggest monthly loss since November 2016 – bulls in danger?
Source: Economic Events September 30, 2020 - Admiral Markets' Forex Calendar
Gold saw its worst week in six months last week and is about to see its biggest monthly loss since November 2016, mostly driven by the current rebound in the US-Dollar. Meanwhile, according to data from the Comex, money managers have continued reducing their Gold long positions at the fastest pace since March 2020. We might come to the conclusion that the picture for the yellow metal has significantly darkened.
While we are feeling sceptical amid these developments and aren't feeling very comfortable painting a positive picture for Gold, we are still positive on the yellow metal.
We are still convinced that the US central bank FED has no other choice than to sooner, rather than later, act and start again ballooning its balance sheet further significantly beyond the 7 trillion USD mark.
Our expectation here is mainly based on the following:
- FED chairman Powell made comments in front of the US congress last week when he said the central bank is committed to helping the economy and that the FED will continue to support and help the US economy "for as long as it takes"
- Powell's comments echoed our take from last week, in which we foresaw the FED delivering liquidity for smaller-sized corporations sooner rather than later
- Democrats and Republicans have not yet found an agreeable fundament for another economic relief package.
That said, we remain cautious of aggressive long engagements in Gold, but continue seeing the current bearish price action as a "shake-out" which is testing the confidence of Gold bulls before we get to see another attempt to push above the 2,000 USD mark.
Still, short-term, the picture is bearish after the break below 1,865 USD, the August lows, with a target on the downside around 1,800 USD, while the short-term target on the upside can be found around 1,900 USD:
Source: Admiral Markets MT5 with MT5SE Add-on Gold Daily chart (between May 16, 2019, to September 29, 2020). Accessed: September 29, 2020, at 10:00 PM GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2015, the value of Gold fell by 10.4%, in 2016, it increased by 8.1%, in 2017, it increased by 13.1%, in 2018, it fell by 1.6%, and in 2019, it increased by 18.9%, meaning that in five years, it was up by 28%.
Discover the world's #1 multi-asset platform
Admiral Markets offers professional traders the ability to trade with MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level than with MetaTrader 4. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5!
Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The analysis is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
- Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
- To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
- Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures that refer to any past performance is not a reliable indicator of future results.
- The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
- Any kind of previous or modelled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
- Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.