Gold bulls hold 1,660 USD – near-term test of the all-time highs still on the table

Junij 10, 2020 13:00

Source: Economic Events June 10, 2020 - Admiral Markets' Forex Calendar

Our opinion of Gold hasn't changed over the last week of trading - despite the weak weekly close, and the massive surprise from the US labour market last Friday.

As a result, the yellow metal dropped below 1,700 USD and went for an attack of the region around 1,660 USD. Still, we remain mid-term clearly bullish for Gold.

One potential reason for the 'big' NFP number is how jobs were calculated and thanks to the massive PPP loan/grants, numbers beat expectations as they did, even though critics will certainly argue that PPP funded jobs should not be counted as "jobs added" to the private sector data.

In addition to that, the BLS already stated in their statement that […]there was also a large number of workers who were classified as employed but absent from work.[…] and that […]if the workers who were recorded as employed but absent from work due to "other reasons" (…), the overall unemployment rate would have been about 3 percentage points higher than reported[…]

However, technically the bearish divergence in the RSI(14) on a daily time-frame plays out now, resulting in a test of the short-term trend-support around 1,660 USD.

Still, as long as we don't get to see a sustainable break lower, our take for the yellow metal stays clearly bullish and we expect rather than later a stint to the all-time high of around 1,920 USD.

One potential driver for such a move could be a sustainable drop in 10-year US Treasury yields below 0.60% which seems, in our opinion, only a question of time.

The reason here can be found in our expectation of a further "liquidity boost" from the Fed which has pushed its balance sheet above the 7 trillion mark last week and should rather sooner than later result in a further drop in US yields, probably initiated by today's Fed rate decision at 6pm GMT:

Source: Admiral Markets MT5 with MT5-SE Add-on Gold Daily chart (between March 11, 2019, to June 9, 2020). Accessed: June 9, 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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