Gold bulls ready for take-off to above 2,000 USD soon?

September 23, 2020 11:30

Source: Economic Events September 23, 2020 - Admiral Markets' Forex Calendar

After Equities saw a very rough start into the week and Gold also saw some selling pressure with the yellow metal attacking the 1,900 USD mark, we suspect precious metals, especially Gold, will become more and more attractive again from a Long perspective.

With FANGMAN (Facebook, Amazon, Netflix, Google, Microsoft, Apple and Nvidia) having lost significantly more than 1 trillion in market cap since the beginning of September, it's becoming more and more obvious again how dependent Equity markets are on the FED's liquidity.

But the thing is: the US central bank ballooned its balance sheet from roughly $4 trillion to a peak of just over $7 trillion between March and June. Since then, its growth has stalled.

And after FED chairman Powell didn't signal an imminent adjustment in the scope nor scale of their QE program last week on Wednesday, the bearish momentum in Equities accelerated.

That said, the current question seems to be: "How long till the FED will step in again?"

Consider the following:

  • Smaller-sized corporations haven't profited that much from the recent run to new highs in US equities
  • Democrats and Republicans are having trouble agreeing on another Corona relief package

As such, the answer might be "Quite soon".

That leaves us with the conclusion that the current bearish price action in Gold might be a "shake-out" before the FED again aggressively expands its balance sheet, thus pushing Gold substantially higher and back above 2,000 USD.

Still, we are considering the technical picture to be neutral between 1,865 and 2,075 USD, with a clearer bullish sign to be sent once we break above the short-term zone of resistance around 1,970 USD.

On the other, we don't want to rule out that we get to see another short run to below 1,900 USD before taking on bullish momentum again:

Source: Admiral Markets MT5 with MT5SE Add-on Gold Daily chart (between May 09, 2019, to September 21, 2020). Accessed: September 21, 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%.

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