Gold below 2,000 USD again – but overall still bullish
Source: Economic Events August 26, 2020 - Admiral Markets' Forex Calendar
Gold bulls lost control of the price action last week, once again, with the yellow metal dropping back well below 2,000 USD.
The main driver was certainly that the FED Minutes showed that some FOMC members are worried about yield curve control since this could result in excessive balance sheet growth.
As mentioned in our technical piece last week
[…] a stint to as high as 2,500/2,600 USD in the next months is 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 to rise too strongly. […],
As such, it is not surprising to see precious metals and Gold drop under such circumstances.
There are a few key points to consider when looking at what direction Gold will head from here.
Gold could drop further if:
- US yields take on bullish momentum again
- US yields push above 0.70% and we see further rising yields.
In this case, a test of the region around 1,865 and probably even a drop lower stays an option in the days to come.
On the other hand, there are some key reasons that Gold could see a recovery:
- There is an overlying bullish bias that could dominate through this slight dip
- We may continue seeing disappointing US economic projections like today's Durable Goods orders
In this case, Gold could hold above 1,900 USD and thus substantially above the August lows around 1,865 USD – in our opinion.
We see the short-term picture as neutral, between 1,865 and the current yearly high around 2,075 USD and, thus, a push back above 2,000 USD remains a possibility at any time.:
Source: Admiral Markets MT5 with MT5SE Add-on Gold Daily chart (between April 12, 2019, and August 25, 2020). Accessed: August 25, 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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