After the biggest drop since 2013 – Gold bulls about to take control again

August 19, 2020 13:00

Source: Economic Events August 19, 2020 - Admiral Markets' Forex Calendar

After the massive volatility in Gold last week on Tuesday, with the yellow metal losing more than 5%, or dropping more than 100 USD per ounce, the most in one day since 2013, markets have calmed down a little.

In fact, one week later, Gold bulls pushed the precious metal back above 2,000 USD and chances for further gains in the near term seem elevated, even though technically we consider the short-term picture neutral between last week's low around 1,865 and the current yearly high around 2,075 USD.

What will certainly be of interest for Gold is what US yields "deliver".

If we get to see further rising yields, a test of the region around 1,865 and probably even a drop lower remains an option in the days to come.

If, on the other hand, US yields drop back towards 0.50% again and even lower, which is possible, a run to new highs for Gold in the upcoming days will be a serious option. This is due to the fact that such a drop would increase the chances of real US yields dropping below -1% once again, making a stint as high as 2,500/2,600 USD in the next months a serious option.

That may be especially true if the FOMC Minutes in the evening show any signs or emphasis from FED officials to establish a rate cap if US yields start rising too strongly.

In general, the bullish sequence remains intact as long as we trade above 1,660 USD:

Source: Admiral Markets MT5 with MT5SE Add-on Gold Daily chart (between April 05, 2019 to August 18, 2020). Accessed: August 18, 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 10.4%. In 2016, it increased by 8.1%. In 2017, it rose 13.1%. In 2018, it fell 1.6%, and in 2019, it increased by 18.9%, meaning that after five years, it was up by 28%.

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