empty
01.07.2020 01:08 PM
Gold is growing by leaps and bounds

When Fed officials are increasingly talking about uncertainty and are not going to raise the federal funds rate before 2023, and the market is full of rumors about a double recession of the US economy, gold has no choice but to grow. The most actively traded COMEX futures with an expiration date in August have already reached $ 1800, and according to Commerzbank, the precious metal on the spot market will do the same very quickly. However, there will be a period of reassessment of its capabilities. To continue the XAU/USD rally, a further fall in the real yield of US Treasury bonds is required, which is not an easy task. The rates on them are already negative.

In April-June, gold managed to strengthen by 13%, which was the best result in the past four years. In contrast to the beginning of 2016, when the precious metal bounced up after six quarters of continuous decline, this time it does not tire of growing for seven consecutive quarters. Market conditions have changed significantly under the influence of trade wars, COVID-19, the recession, and aggressive monetary expansion of the world's leading central banks.

Quarterly dynamics of gold

This image is no longer relevant

From a fundamental point of view, the W-shaped recovery of the US economy will light the green light for the US dollar, which will be extremely unpleasant news for the "bulls" for XAU/USD. It is unlikely that the Fed in this scenario will be able to give financial markets more than it has already given. However, while the double recession has not happened, gold attracts investors like honey to a bear.

The huge monetary stimulus does not allow the US dollar to grow even against the background of the reduction of the Fed's balance sheet for the last two weeks in a row. This is most likely due to the effectiveness of currency swap programs.

Dynamics of the Fed's balance sheet

This image is no longer relevant

Investors are looking forward to the publication of the minutes of the last FOMC meeting and the release of data on the US labor market for June. According to Bloomberg experts, employment may grow by 3 million, which will increase the likelihood of a rapid recovery in the US economy and theoretically deprive gold of such an important trump card as the falling real yield of Treasury bonds. However, in this scenario, the dollar will probably suffer, so it is unlikely that the XAU/USD correction will be deep. As for the protocol, the talk about the Federal Reserve targeting the yield of debt obligations, at first glance, should warm the ears of fans of the precious metal. Gold does not need this right now. Bond rates are already falling.

The impressive XAU/USD rally was not ignored by major banks and investment companies. Citigroup raised its forecast for gold by 3 months to $ 1,825 per ounce, and TD Securities believes that the precious metal will soon change the main driver of growth. If it is currently being bought as a safe-haven asset, then later it will be purchased as a hedge against the risks of accelerating inflation. Formed in early June from the $ 1675 level, the longs will soon reach the target for the AB=CD pattern at $ 1830. Those who did not take advantage of my recommendation can only hope for a pullback to $ 1765 and $ 1745 per ounce, where the precious metal should be bought.

Gold, the daily chart

This image is no longer relevant

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

XAU/USD. Analysis and Forecast

Gold is experiencing a slight decline after reaching a new all-time high, remaining in a defensive stance. Currently, bullish traders are exercising caution, as indicated by overbought conditions

Irina Yanina 10:29 2025-03-20 UTC+2

Fed's message music to bulls' ears

The Fed is not throwing a lifeline to the S&P 500, but does it need one? Lifelines are for those drowning, while the market is merely spooked by a fleeting

Marek Petkovich 09:05 2025-03-20 UTC+2

Markets Are Stuck in a Vicious Circle with No Exit in Sight (Potential Decline for Bitcoin and Gold Prices)

The markets are currently experiencing significant shock due to a prevailing negative sentiment that looms over them like a heavy burden, with no resolution in sight. Given this situation

Pati Gani 08:23 2025-03-20 UTC+2

What to Pay Attention to on March 20? A Breakdown of Fundamental Events for Beginners

There are several macroeconomic events scheduled for Thursday, primarily in the UK. Key reports will include the unemployment rate, changes in the number of unemployed individuals, and average wages

Paolo Greco 07:15 2025-03-20 UTC+2

GBP/USD Pair Overview – March 20: Bank of England Vote May Cool Bullish Sentiment

The GBP/USD currency pair traded very calmly on Wednesday, considering the evening movements. As a reminder, we are not analyzing the results of the Federal Reserve meeting

Paolo Greco 02:18 2025-03-20 UTC+2

EUR/USD Pair Overview – March 20: The Euro Holds a Strong Leadership Position

On Wednesday, the EUR/USD currency pair experienced a slight pullback but failed to consolidate below the moving average line. As per tradition, we will not analyze the outcome

Paolo Greco 02:18 2025-03-20 UTC+2

EUR/JPY: Mixed Outcomes of the Bank of Japan's March Meeting and Germany's "Debt Brake" Reform

The Bank of Japan has concluded its March policy meeting, delivering the most anticipated baseline scenario—keeping all monetary policy parameters unchanged. Market participants closely followed the statements of BOJ Governor

Irina Manzenko 23:43 2025-03-19 UTC+2

Euro Hits the Ceiling

Bets are now closed, ladies and gentlemen! Many have already played out. The EUR/USD's hesitation to rise following the Bundestag's approval of Friedrich Merz's fiscal stimulus package indicates that this

Marek Petkovich 23:43 2025-03-19 UTC+2

USD/CAD. Analysis and Forecast

The USD/CAD pair is showing signs of recovery for the second consecutive day after a recent decline, rebounding from a two-week low around 1.4260. Spot prices have climbed above

Irina Yanina 10:16 2025-03-19 UTC+2

Stock market pays dear cost for Washington's rhetoric

The boomerang effect: what goes around, comes around The US is retreating from globalization, and it is only a matter of time before it faces the consequences. According

Marek Petkovich 09:51 2025-03-19 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.