Gold holds above 1,900 despite ‘disappointing’ Powell – bullish?

September 02, 2020 09:30

Source: Economic Events September 02, 2020 - Admiral Markets' Forex Calendar

Price action in Gold has been really exciting over the past two weeks, even though, technically, we are still trading in neutral territory between 1,865 and 2,075 USD.

After several FED members were worried about yield curve control, as it could result in excessive balance sheet growth, a week later Gold bulls were disappointed once again, this time from a speech from FED chairman Powell in Jackson Hole.

While Jay Powell brought up "average inflation targeting", meaning that the FED will allow inflation to run above the FED target rate of 2% for a period of time, this communication was broadly expected and thus Gold wasn't able to take on enough momentum to run back to above 2,000 USD.

Here's how it played out:

  • It really looked as if this could be the trigger for a deeper correction in the yellow metal with a target around 1,800 USD
  • The precious metal instead presented itself as very stable, settling above 1,900 USD
  • It then made another attempt at recapturing the 2,000 USD mark.

In our opinion, this can be considered a very strong sign since the overall mid- to long-term bullish picture in Gold remains intact and even short-term disappointing news couldn't trigger a deeper correction, despite the stretched technical and sentiment-based picture.

That said, here's what we are forecasting for yellow metal:

  • We see a good chance of Gold pushing back to above 2,000 USD, especially if today's US economic projections disappoint, especially around the ADP employment change
  • As already pointed out, the technical mode on the daily time frame remains neutral between 1,865 and 2,075 USD
  • A break to the upside could activate the next target at around 2,500/600 USD in the weeks to come
  • A break to below 1,865 USD would level the path down to 1,800/810 USD as a first target

All in all, the mood is bullish:

Source: Admiral Markets MT5 with MT5SE Add-on Gold Daily chart (between April 22, 2019, to September 01, 2020). Accessed: September 01, 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 after five years, it was up by 28%.

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