Gold with new yearly Highs on Monday – new all-time highs ahead?

May 20, 2020 10:30

Source: Economic Events May 20, 2020 - Admiral Markets' Forex Calendar

Gold bulls made a clear statement at the start of the week by pushing the precious metal to new yearly highs.

Nevertheless, technically the bearish divergence in the RSI(14) on a daily time-frame is still on the table. So, while the door is open for a stint at the current Gold all-time high around 1,920 USD, Gold bulls still should stay cautious in regards to overly aggressive long engagements, even though from a fundamental perspective, the path higher seems set.

Fundamentally the driver higher can surely be found in the testimony from Fed chairman Powell in front of the US congress already last week on Wednesday.

While his remarks on his assessment of the current US economic situation and the taken measures of the Fed to counter the economic downturn driven by the 'Corona lockdown' didn't surprise, the comments on the Fed not having a plan in regards to negative rates, despite US president Trump's tweets last Tuesday and the market has priced-in Fed funds going into the negative in the futures market at the beginning of May for the first time ever, were mostly ignored with Gold pushing higher.

In fact, the statement seems clear here: "We expect the Fed to do everything they can and flood markets with trillions of US-Dollar if necessary – and thus push the price of Gold higher."

Indeed, this expectation was partly confirmed from Powell last Sunday in CBS "60 Minutes" where Powell said, "In the long run, and even in the medium run, you wouldn't want to bet against the American economy" while acknowledging that the unemployment rate could hit as high as 25%.

If today's FOMC Minutes are interpreted in this direction as well, even though only between the lines, chances seem good that we already see the current all-time high in Gold get in our focus into the second half of the week.

Technically, the picture stays bullish as long as we trade above 1,660 USD:

Source: Admiral Markets MT5 with MT5-SE Add-on Gold Daily chart (between February 18, 2019, to May 18, 2020). Accessed: May 18, 2020, at 10:00pm 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%, in 2019, it increased by 18.9%, meaning that after five years, it was up by 28%.

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