Gold – anti-crisis currency

Trading 29 avr 2020 Donner votre avis

Information about the gradual opening of the American and several European economies allowed the world stock indices to continue the rally and clipped the wings of the "bulls" for XAU/USD. However, it should not be considered as a factor of the long-term weakness of gold. First, the global recession has not been canceled, which suggests further deterioration in macrostatistics and continued high demand for safe-haven assets. Second, investors have taken to buying both stocks and precious metals at the same time. The latter is used as a hedging tool against existing risks.

In general, gold continues to function as a safe haven asset but is not used as a panic medicine like the US dollar. Fear in the US equity market has given way to greed. Investors are trying not to miss the S&P 500 train going North, but large-scale spending by governments and central banks to save economies will continue to increase. This circumstance allows gold to look to the future with confidence.

Dynamics of monetary stimulus volumes

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A significant increase in fiscal stimulus will lead to an increase in public debt relative to GDP by 10-15 percentage points. According to Moody's estimates, the US budget deficit in 2020 will expand from 4.6% to 15% of the size of the economy. The Fed's unlimited purchases of treasury and mortgage bonds indicate that the central bank is actively participating in the debt monetization process, which is good news for the XAU/USD bulls. At the same time, aggressive monetary expansion of the Federal Reserve, ECB, Bank of Japan, and other regulators contributes to the weakness of their issued monetary units, and gold, according to Commerzbank, remains in demand as the main anti-crisis currency. Its long-term prospects are painted in bright colors. It is also possible to update the historical maximum of $1921 per ounce.

The fact that the precious metal flows from Asia to Europe and the United States also testifies to the preservation of the "bullish" momentum. Investment demand is high and the price increase leads to a consumption reduction in the field of jewelry in India and China. In the United States, American Gold Eagles coins are flying like hotcakes. The premiums on their purchase reach a record of $135 per ounce compared to spot market prices.

Thus, there is no doubt about the strength of the long-term upward trend for XAU/USD. Another thing is that in the short term, the risks of a pullback gradually increase. The poor statistics on US GDP for the first quarter, Jerome Powell's doubts about the V-shaped recovery of the US economy and its slower opening than previously expected, may trigger the process of profit-taking on long positions on US stock indices and lend a helping hand to the dollar. As a result, gold risks falling to $1,665 and $1,635 per ounce, where it will be possible to start forming long-term longs.

Technically, there are important Pivot levels at $1,665 and $1,635, and updating the April high activates the child pattern AB=CD with a target of 161.8%. It corresponds to the $1,800 per ounce mark.

Gold, the daily chart

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The material has been provided by InstaForex Company - www.instaforex.com

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